Understanding BHPH payment allocation

The allocation order

ClozBox applies each payment in this order: fees first, then interest, then principal. Only what is left after fees and the interest owed reduces the balance. Your contract and state rules decide what fees can be charged and when; ClozBox applies the grace periods and late fees you configure.

Why the payment date matters

With Actual/365 simple interest, interest grows by the day: balance × annual rate × days since the last payment ÷ 365. A payment that arrives earlier covers fewer days of interest, so more of it reaches principal. A late payment covers more days, so less does.

A worked example (fictional numbers)

Balance $8,000.00, contract rate 20%, 30 days since the last payment, and a $15.00 late fee owed. The customer pays $300.00.

Interest for 30 days: $8,000.00 × 20% × 30 ÷ 365 = $131.51. The payment covers the $15.00 fee, then the $131.51 interest, and the remaining $153.49 reduces the balance to $7,846.51.

If the same $300.00 arrived after 20 days with no late fee, interest would be $87.67, and $212.33 would reach principal.

Partial and extra payments

A partial payment still follows the same order, so a small payment may cover fees and interest without touching the balance. An extra payment goes further into principal. ClozBox records partial and extra payments as they are, against the account’s schedule.

Corrections without erasing history

Mistakes happen: the wrong account, the wrong amount. In ClozBox a posted payment is not edited away. It is voided or reversed with a reason, and the original entry stays visible, so the account history always explains how the balance got where it is.

Payoffs

Because interest depends on the date, a payoff amount is only correct for a specific day. ClozBox produces payoff quotes for a chosen date for that reason.