Loan Product
Loan Product represents a lending product offered by a bank or NBFC to its borrowers. In Frappe Lending, each loan product defines the rules governing interest calculation, repayment schedules, delinquency handling, loan closure, and other operational policies.
To access Loan Products, navigate to:
Home → Lending → Loan → Loan ProductDid You Know?
Each Loan Product acts as a reusable template. Once configured, every loan created under that product automatically inherits its repayment, interest, and policy settings.
Prerequisites
Before creating a Loan Product, ensure the following records are available:
- Company
- Loan Category
Creating a Loan Product
To create a new Loan Product:
- Navigate to the Loan Product list.
- Click Add Loan Product.
- Enter details such as Product Code, Product Name, Interest Rate, Repayment Schedule Type, and other lending policies.
- Click Save.
Repayment / Amortization Schedule Types
Frappe Lending supports multiple repayment schedule types to accommodate different lending models.
| Schedule Type | Description |
|---|---|
| Monthly as per Repayment Start Date | Generates repayments based on the borrower-selected repayment start date. Supports monthly, weekly, quarterly, and one-time payment frequencies. |
| Pro-rated Calendar Months | Creates repayment schedules aligned with calendar months, allowing payments at either month-end or the beginning of the next month. |
| Monthly as per Cycle Date | Uses a predefined cycle day for all repayments while allowing users to override the cycle during loan booking. |
| Line of Credit | Supports revolving credit facilities with multiple disbursements and multiple active repayment schedules. |
| Flat Interest Rate | Calculates repayments using a predefined flat-rate interest structure across the loan tenure. |
Note
Most repayment schedule types allow only one active repayment schedule. The Line of Credit option is an exception, supporting multiple active schedules for multiple disbursements.
Additional Configuration
| Setting | Description |
|---|---|
| BPI Recovery Method | Defines how Broken Period Interest (BPI) is recovered, such as upfront deduction, amortization across the tenure, or adding it to the first or last EMI. |
| Cyclic Day of the Month | Specifies the monthly repayment date when using the Monthly as per Cycle Date schedule. |
| Days Past Due Threshold for NPA | Defines the number of overdue days after which a loan is classified as a Non-Performing Asset (NPA). |
| Minimum Days Before First Repayment | Ensures sufficient time exists between loan disbursement and the first repayment installment. |
| Excess Amount Acceptance Limit | Determines the maximum excess payment that can be accepted during final loan closure while allowing automatic closure. |
| Auto Write-Off Amount | Specifies the maximum residual outstanding amount that can be automatically written off during loan closure. |
| Grace Period (Days) | Defines the number of days after the due date during which penal interest is not charged. |
Loan Closure Rules
Loan Products also define how small outstanding balances and excess repayments are handled during the final settlement.
| Scenario | System Behavior |
|---|---|
| Outstanding Amount Within Auto Write-Off Limit | The remaining balance is automatically written off, allowing the loan to close successfully. |
| Excess Payment Within Acceptance Limit | The excess amount is transferred to the customer refund account, and the loan is automatically closed. |
| Excess Payment Above Acceptance Limit | The excess amount is still transferred to the customer refund account, but the loan remains open until resolved. |
Best Practices
- Choose the repayment schedule type based on your lending model before onboarding borrowers.
- Configure NPA thresholds according to your organization’s regulatory requirements.
- Set realistic grace periods and write-off limits to reduce manual intervention during loan servicing.
- Review excess payment handling policies to ensure smooth loan closure and customer refund processing.
- Reuse Loan Products for similar lending schemes to maintain consistency across loan accounts.
