The Real Meaning of "Amount Due"

Whether lenders keep track of loans in a notebook, in Excel, or in dedicated loan software, "Amount Due" is an important number… but maybe not for the reason you think. Amount Due is theoretical compared to the actual payment you receive from a borrower.

Of course, you hope the concept and reality always match. In real life, though, that often doesn't happen. And that's where the difference becomes important.

When asking for a payment, Amount Due is how much the lender wants from the borrower right now. From a borrower's point of view, it's the agreed-upon sum to consistently pay. Amount Due is not directly connected to principal and interest. It’s not the actual payment. That does get applied, lowering the total that's owed.

If the Amount Due and installment aren't identical, the lender needs to take whatever actions the loan agreement established. For instance, if the payment is less than Amount Due:

·      A late fee could kick at the end of the grace period.

·      After at least 30 full days past due, the lender might inform credit reporting agencies that the borrower is behind.

What if the payment is at the other end of the spectrum? The borrower has paid more than the Amount Due. Typically, the lender applies the extra towards the principal.

Full payment, underpayment, overpayment: Amount Due is the standard that determines a loan's status, but it's separate from the funds themselves. After setup, Moneylender Professional loan servicing software handles all kinds of transactions, so you don't need to ponder the difference between theory and practice when entering payments.