Open-ended Note
An Open-ended Note is a loan with no end date and no set number of installments. Each period, interest is charged on what the customer still owes, and anything they pay above that interest reduces the principal. The loan stays active until the balance reaches zero.
When to use it
Use it when you lend without a fixed term: the customer pays you the interest every week, two weeks or month, and pays down the principal when they can. If you already know how many installments or on what date the loan will be paid off, use Fixed Interest or Amortized. See Installments and interest.
Create an open-ended note
Open-ended notes are created in the app.
- Start a new loan as usual. See Creating a loan.
- Under Loan Type, choose Open-ended Note.
- Enter the amount, the rate and the payment frequency.
- Instead of the end date you'll see No end date with the value Indefinite, and the Calculate by installments switch doesn't appear.
- Check the summary: Total Payments says Indefinite and Payment per Period shows the first period's interest.
- Finish creating the loan.
If you don't see Open-ended Note in the list, turn it on in the menu (☰) › Settings › Loan configuration, under Visible loan types. See Loan settings.
The Round installment option doesn't apply to this type, because the interest changes every time the balance goes down.
How each period's interest is calculated
The period's interest is the outstanding balance × the rate, adjusted by the calculation basis the loan was created with:
- Monthly: the rate is split across the month's payments. A daily payment carries 1/30 of the rate, a weekly one 1/4, a biweekly one 1/2 and a monthly one the full rate.
- Per period: the full rate is charged on each payment.
Example: you lend 10,000 at 10% monthly with biweekly payments (Monthly basis). Each biweekly period's interest is 5% of the balance: 500. If the customer pays 2,000 toward principal, the balance drops to 8,000 and the next period's interest drops to 400.
Receiving payments
When you receive a payment on an open-ended note, the options work like this:
- Installment Payment: this is the period's interest, calculated on the balance at that moment. It covers the interest and the principal doesn't change.
- Interest only: pays the same period interest; the principal doesn't change.
- Other amount: use it to pay down principal. If the amount reaches the period's interest, the app asks whether the payment includes it: if you say yes, the interest is covered first and the rest lowers the principal; if you say no, all of it lowers the principal. If the amount is less than the interest, all of it goes to principal.
- Total Due: pays only the outstanding principal, without the period's interest.
- Pay off loan: pays the outstanding principal plus the period's interest.
With Total Due or Pay off loan the balance reaches zero and the loan is paid.
How it looks in the loan detail
On the loan card, Quota shows Indefinite because there's no number of installments. Installment Payment shows the interest calculated when the loan was created, on the initial amount. After principal payments, you'll see the updated interest under Installment Payment when you receive a payment.
Plan
The open-ended note has no plan restriction of its own: if you can create loans, you can create open-ended notes. This includes accounts that come from a one-time purchase. See I already paid for the app (one-time purchase).
On the web
You can't create open-ended notes on loanadmin.app: the web form only offers Fixed Interest and Amortized. The ones you created in the app show up on the web as Fixed Interest, and web payments don't calculate interest on the balance. For now, collect your open-ended notes from the app.