Cost Apportionment Priority Rationale

Allocation of funds follows a strict hierarchy designed to prioritize asset protection and penalty clearance before principal reduction.

The order dictates the priority in which a payment is applied to various charges:

const apportion_order = [
    'credit_life',   // 1
    'insurance',     // 2
    'late_interest', // 3
    'late_service',  // 4
    'initiation',    // 5
    'interest',      // 6
    'service',       // 7
    'discount',      // 8
    'capital',       // 9
]

1. Risk Mitigation & Mandatory Costs (Ranks 1–2)

These items are prioritized to satisfy legal requirements and protect the underlying asset.

• Rank 1: Credit Life (credit_life) – Ensures loan repayment in the event of borrower death or disability. Immediate payment is required to maintain active coverage.

• Rank 2: Insurance (insurance) – Covers mandatory collateral insurance to protect the lender’s security interest against damage or loss.

2. Penalty & Remedial Costs (Ranks 3–4)

Costs incurred due to payment arrears. These are cleared immediately to prevent the compounding of further penalties.

• Rank 3: Late Interest (late_interest) – The cost of funds associated with late payments. This is the highest-priority penalty.

• Rank 4: Late Service Fees (late_service) – Administrative costs incurred by the lender to process overdue payments.

3. Core Profit & Operating Costs (Ranks 5–7)

Standard fees and interest charges required to cover the lender’s cost of capital and overhead.

• Rank 5: Initiation Fee (initiation) – Deferred setup fees spread across installments.

• Rank 6: Interest (interest) – The primary cost of borrowing (time value of money), which must be satisfied before principal reduction.

• Rank 7: Service Fee (service) – Recurring monthly administrative fees for account management.

4. Debt Reduction (Ranks 8–9)

Applied to the outstanding balance only after all fees, insurance, and penalties are satisfied.

• Rank 8: Discount (discount) – Any applicable credits or incentives reducing the total cost.

• Rank 9: Capital (capital) – Reduction of the actual outstanding principal debt.