Loan Charges

Loan Charges in Frappe Lending allow financial institutions to configure and apply additional fees associated with a loan. These charges are managed through the Item and Sales Invoice modules, making it easy to apply fees while keeping accounting and loan demands synchronized.

Loan charges can represent processing fees, documentation charges, insurance premiums, prepayment penalties, or any other fees applicable during the loan lifecycle.

Did You Know?

Charges applied through Sales Invoices automatically generate Loan Demands based on the invoice due date, ensuring that repayment schedules remain accurate.

Common Types of Loan Charges

Depending on the loan product and lender policies, different charges can be applied during loan processing or servicing.

Charge Type	Description
Processing Fee	Covers administrative costs involved in reviewing and processing a loan application.
Prepayment Penalty	Charged when a borrower repays the loan before the scheduled tenure ends.
Insurance Premium	Insurance charges associated with the loan, such as mortgage or credit protection insurance.
Documentation Charges	Fees collected for preparing legal agreements and loan-related documentation.

Accessing Loan Charges

To configure charges, navigate to:

Home > Lending > Taxes and Charges > Charge

Creating a Charge

Charges are maintained as Items so they can be easily reused across multiple loan transactions.

Open the Item List and click Add Item.
Enter the charge details such as Item Code, Item Name, applicable taxes, and other required information.
Save the record.

Note

If taxes are configured in the Charge (Item) master, they are automatically applied whenever the charge is added to a Sales Invoice.

Applying Charges to a Loan

Loan charges are applied by creating a Sales Invoice linked to the required Loan Account.

1. Open the Sales Invoice List and click Add Sales Invoice.
2. Select the Loan Account for which the charges should be applied.
3. Add one or more configured Charge Items.
4. Review the automatically calculated taxes, if applicable.
5. Save and Submit the Sales Invoice.

Loan Demand Generation

Once the Sales Invoice is submitted, Frappe Lending automatically creates Loan Demand records for the applied charges based on the invoice due date. These demands become part of the borrower’s repayment obligations and are processed through the normal collection workflow.

Best Practices

Create reusable Charge Items for commonly applied loan fees.
Configure tax rules in the Charge master to automate tax calculations.
Always link charges to the correct Loan Account when creating Sales Invoices.
Review generated Loan Demands after invoice submission to ensure repayment schedules remain accurate.

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