Example Payment Plan Fee Calculations
When you create a payment plan, you can charge your customer an optional financial fee. Aria supports three fee types: percentage-based, flat, and amortized interest. This article explains how Aria calculates each fee type and provides an example of each. For information on configuring a financial fee, see Payment Plans.
How Aria Calculates the Fee
Aria calculates the financial fee only on the balance of the installment sequences. If the payment plan includes a lump sum, Aria excludes it from the fee calculation. Aria then allocates the resulting fee proportionally across the installment sequences.
You define the fee type using the <fee_type> field when you create the fee inventory item with create_inventory_item_m. The field accepts the following values:
- P (Percentage-based): Aria calculates the fee as a percentage of the installment balance.
- F (Flat): Aria charges a fixed fee amount for the payment plan.
- A (Amortized interest): Aria calculates the fee as interest, distributed so that earlier installments include a higher interest component and later installments include less, as the principal balance decreases.
Once you assign the fee to the payment plan, Aria generates an invoice for the fee automatically.
Note: Aria suppresses the fee invoice from your customer's statement. If a third party needs the fee statement, they can retrieve it through the XML template statement delivery method.
Percentage-Based Fee
For a percentage-based fee, Aria multiplies the installment balance by the fee percentage to get the total fee, then divides the total fee evenly across the installment sequences.
Example: Your customer has a $1,200 past-due balance, structured as a $200 lump sum plus $1,000 spread across 10 monthly sequences of $100 each. You apply a 5 percent percentage-based fee. Aria calculates the fee only on the $1,000 installment balance (the lump sum is excluded), which yields a $50 total fee. Aria divides the fee evenly across the 10 sequences, so each sequence carries a $5 fee. Each monthly installment therefore totals $105 ($100 principal plus $5 fee).
| Sequence | Principal Due | Fee Due | Total Due |
|---|---|---|---|
| 1 through 10 | $100.00 | $5.00 | $105.00 |
Flat Fee
For a flat fee, Aria uses the fixed amount you configure as the total fee, then divides that amount evenly across the installment sequences. Aria distributes a flat fee the same way it distributes a percentage-based fee. The only difference is that the fee amount is a fixed value rather than a calculated percentage.
Example: Using the same $1,000 installment balance spread across 10 monthly sequences of $100 each, you configure a $50 flat fee instead of a percentage-based fee. Aria divides the $50 fee evenly across the 10 sequences, so each sequence carries a $5 fee. Each monthly installment totals $105 ($100 principal plus $5 fee), the same result as the percentage-based example.
Amortized Interest Fee
An amortized interest fee works like a loan amortization schedule. Aria calculates the total interest upfront by applying a rate to the outstanding principal balance over the term of the plan. Aria then distributes that interest so that each installment totals the same amount, but the split between principal and interest shifts each sequence: earlier installments include more interest and less principal, and later installments include less interest and more principal, as the outstanding balance decreases.
Example: Your customer has a $1,000 installment balance spread across 10 monthly sequences, with an amortized interest fee set at an annual rate of 12 percent (1 percent monthly). Aria calculates a level monthly installment of $105.58. Each installment includes a different combination of principal and interest, as shown in the following table.
| Sequence | Opening Balance | Principal Due | Fee (Interest) Due | Total Due |
|---|---|---|---|---|
| 1 | $1,000.00 | $95.58 | $10.00 | $105.58 |
| 2 | $904.42 | $96.54 | $9.04 | $105.58 |
| 3 | $807.88 | $97.50 | $8.08 | $105.58 |
| 4 | $710.38 | $98.48 | $7.10 | $105.58 |
| 5 | $611.90 | $99.46 | $6.12 | $105.58 |
| 6 | $512.44 | $100.46 | $5.12 | $105.58 |
| 7 | $411.98 | $101.46 | $4.12 | $105.58 |
| 8 | $310.52 | $102.47 | $3.11 | $105.58 |
| 9 | $208.05 | $103.50 | $2.08 | $105.58 |
| 10 | $104.55 | $104.55 | $1.03 | $105.58 |
Note: Aria adjusts the final installment as needed so the total principal collected equals the original installment balance exactly.
In every sequence, your customer pays the same total amount, but the principal portion grows and the interest portion shrinks as the plan progresses.