Organizations using Offset Accounts in their Line of Credit (LOC) business have the ability to include these accounts when pricing Opportunities in PrecisionLender. As an Admin, you can enable Offset Accounts for specific Products in PrecisionLender, where LOC is marked as an allowable Payment Type.
In this Article
What is an Offset Account?
Offset Accounts allow borrowers to synthetically reduce the principal balance outstanding on the LOC, therefore reducing the amount of interest the borrower will pay on the loan. Balances of Offset Accounts can be entered as a dollar amount, percentage of Average Balance, or percentage of Commitment. The Offset Account Value Type is configured at the Product level and can not be changed within an Opportunity.
Since Offset Accounts are only available for LOC Opportunities, they are mostly always associated with floating rate loans. Both the loan and Offset Account have balances, and both have interest rates (typically spreads over the same index). The impact of the Offset Account is a component of the Net Interest Income on the Financial Statement.
Setting up Offset Accounts
To enable Offset Accounts for Commercial Loan Products, navigate to the Administration Section, then select Products from the menu on the left. Next, open the Commercial Loan Product you would like to enable Offset Accounts for, and find the Policies & Defaults area within the Product Configurations & Defaults section of the Product Edit screen. Only products with ‘LOC’ selected as an Allowable Payment Type will display details for enabling Offset Accounts.
After selecting the ‘Enable LOC Offset Account’ checkbox, choose the Offset Account Value Type: Balance, Percent of Average Balance, or Percent of Commitment. Each product can only have one Offset Account Value Type.
Save your changes to complete this process. Current Offset Account settings will be noted on the Product Printout. For more information about using Offset Accounts in PrecisionLender, see Pricing Opportunities with Offset Accounts.