ASPIRE’s variable rate functionality consists of two rate components that combine at any point in time to make the customer-facing rate on a floating rate lease or loan.
The two rate components are:
- Benchmark Rate – The floating/variable rate component tied to a table that is updated by the finance company as needed to reflect the terms of the agreement and movements in the chosen benchmark source (e.g., SOFR, Ameribor, BSBY, Prime, etc.)
o With this functionality, it is the finance company’s responsibility to feed the system with the “correct” rate based on the terms of the agreement. For example, if for “Daily Simple SOFR” the agreement says that the benchmark is the preceding 30 day average of daily SOFR with simple compounding AND that simple average rate is not directly published, the finance company is responsible for taking the published rates and computing the average prior to feeding the rate into the system. If you are using a published rate directly (e.g., term Ameribor), that rate can be fed directly into the system
- Plus Factor – The fixed rate component that is contract-specific
o Similar to the Benchmark Rate, if there is some computation to get to this rate it is the finance company’s responsibility to calculate the rate prior to entering in the system.
The way the user would interact with the system to setup a
variable rate lease or loan is as follows:
1. Set the contract as variable rate by checking the Variable checkbox on the Contract Main - Payment Schedule tab.
2. Select the Benchmark from the dropdown list
a. The
Benchmark can be named whatever you want (e.g., Ameribor – 90 Day, 90 Day
Ameribor, 3M Ameribor, etc.) and should be named so that a user can easily
understand which benchmark (combination of Index, Tenor, and potentially the
day of the month the rate is pulled each month) they are choosing.
3. Enter a rate for the Plus Factor (fixed rate) component
On an on-going basis, each Benchmark table will be updated with new rates and effective dates.
Each contract attached to the updated Benchmark will be automatically modified to re-amortize and re-cast the payment schedule.