Every loan applies its regular payments through a waterfall: the order its buckets (escrow, interest, principal, late charges) get paid. That order is per loan.
Where you see it
- The Record Payment modal shows the hint "This loan applies: …" with the loan's live order, so you know how the installment will be applied before you save.
- The order is set in the loan wizard when creating a loan, and changed later from Edit Loan.
The default
New loans default to escrow → interest → principal → late charges. Legacy loans created before configurable waterfalls are serviced fees-first.
What the order does not do
The waterfall decides how the installment is applied. It never silently pays a late charge out of that installment. A charge is billed on top of the amount due. When a loan carries outstanding charges, the Record Payment modal asks you to apply, waive or defer them and refuses to save until you answer (see Recording a payment). The loan's order only decides which answer is pre-marked "· loan default": fees-before-principal loans suggest Apply, everything else suggests Defer.
Reordering re-applies history
Changing the order isn't cosmetic. When you save a new order, NoteHarbor re-applies every recorded payment on the loan through the new waterfall (a full recalculation), and re-derives the late fees that follow from it. The editor warns you first: changing the order re-applies all recorded payments on the loan.
That keeps the loan's entire history consistent with one set of rules, instead of a mix of old-order and new-order payments.
Reordering is an audited change. If you only need one unusual payment (say, principal-only), use an application type on that payment instead (see Recording a payment).