First‑Period Length and Factor

The first‑period length and first‑period factor are two of the most important timing values used in the loan calculation engine.

Because no two loans are ever identical in timing, these values make sure that interest, service fees, insurance Premiums, and cost‑of‑credit limits are always calculated fairly and accurately — no matter when a loan starts or ends.

In short, the first‑period factor provides the “time weight” that anchors all day‑based or period‑based calculations in the engine.

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What the System Measures?

When a user captures a new quotation, the system records:

• Loan Start (Payout) Date: when the funds are disbursed to the borrower.

• First Instalment Date: when the first repayment is scheduled.

• Repayment Frequency: how often payments are made (Monthly, Fortnightly, or Weekly).

From there, the engine runs several quick internal checks to find:

1. How many days normally make up one repayment cycle (for example 30 days for monthly loans, 14 days for fortnightly, or 7 days for weekly).

2. How many actual calendar days exist between the payout and first instalment date.

3. The ratio of those two numbers, which becomes the first‑period factor.

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How the App Calculates First‑Period Length?

The engine uses a simple but powerful process:

1. It starts by assigning a default “full‑period” day count, depending on how often repayments occur.

   Repayment Frequency	Default Days
   Monthly	30 days
   Fortnightly	14 days
   Weekly	7 days

2. It then calculates the exact number of calendar days between the loan start date and the first instalment date. This is called the Initial Period Days. Example:

   • Loan Start: 10 April 2025

   • First Instalment: 30 April 2025

   • Actual Days = 20

3. Finally, it divides those actual days by the standard number of days in a full period to create the First‑Period Factor. First‑Period Factor = {20} ÷ {30} = 0.67

This means the first repayment period is two‑thirds as long as a normal 30‑day cycle.

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How the Factor Is Used in Calculations

Once the factor has been set, the entire loan system uses it across multiple components:

Loan Element	How the Factor Is Applied
Interest	Interest is charged only for the exact number of days in the first cycle. If the first period is shorter than usual, the system reduces the interest accordingly; if it’s longer, interest increases proportionally.
Service Fee	The monthly service charge (e.g. R 60) is prorated using the factor. For a 20‑day first period, the borrower pays only 20 / 30 × R60 = R40.
Insurance (Credit or Voluntary)	Premiums are similarly adjusted so that the borrower pays only for the actual period of cover.
Cost‑of‑Credit (CoC) Caps	Maximum allowable fees and total loan cost ceilings are multiplied by the same factor, ensuring the loan stays within legal NCR limits even in partial months.

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The first‑period length and factor are foundational constants in every calculation that depends on time. They’re what allow the system to move beyond rough “monthly averages” and instead compute fees using actual calendar days.

Example in Practice

Detail	Example Value
Loan Start / Payout	16 October 2025
First Instalment	17 November 2025
Actual Days Between	32 days
Frequency	Monthly (30 days default)
First‑Period Factor	32 ÷ 30 = 1.07

Because the loan lasts 32 days instead of 30, the factor (1.07) increases interest and insurance premium slightly to align with the real duration.

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The First‑Period Length and First‑Period Factor are the time anchors of the loan calculation engine. By comparing the actual number of days between the loan’s start and first repayment with a standard cycle length, the system ensures every time‑based cost — whether interest, service fee, or insurance premium — is calculated fairly, precisely, and in compliance with NCR cost‑of‑credit rules.