Loan Disbursement
Loan Disbursement is the process of releasing approved loan funds from the lender to the borrower or a third party, such as a seller or service provider, based on the loan agreement.
In Frappe Lending, Loan Disbursement represents the stage where approved loan amounts are released and loan accounting entries are initiated in the system.
Did You Know?
Loan disbursement triggers the financial recording of the loan, allowing lenders to track released funds, accounting entries, and repayment activities.
Accessing Loan Disbursement
To create or manage loan disbursements, navigate to:
Home > Lending > Disbursement and Repayment > Loan DisbursementPrerequisites
Before creating a Loan Disbursement, ensure the following record is available:
- Loan
Note
A Loan record must exist before creating a disbursement entry, as the disbursement amount is linked to the respective loan account.
Creating a Loan Disbursement
Follow these steps to create a new Loan Disbursement:
- Open the Loan Disbursement List.
- Click on Add Loan Disbursement.
- Enter the Loan Account Number.
- Enter the Disbursement Amount.
- Select the required Bank Account Ledger for disbursement, if required.
- Save the record.
If a bank account ledger is not selected manually, the default account configured in the Loan Product will be used.
Key Information in Loan Disbursement
| Field | Description |
|---|---|
| Loan Account Number | Identifies the loan against which funds are being released. |
| Disbursement Amount | Defines the amount of funds released to the borrower or third party. |
| Bank Account Ledger | Specifies the account from which the loan amount is disbursed. |
Withholding Security Deposit
Frappe Lending allows users to optionally withhold one EMI amount as a security deposit during loan disbursement.
To enable this feature, users can activate the Withhold Security Deposit checkbox while creating the Loan Disbursement.
Note
The withheld security deposit can help lenders maintain additional financial protection based on their lending policies.
Benefits of Using Loan Disbursement
| Benefit | Description |
|---|---|
| Fund Tracking | Maintain accurate records of loan amounts released to borrowers. |
| Accounting Management | Automatically initiate loan accounting entries after disbursement. |
| Flexible Configuration | Allow selection of specific bank accounts or use default accounts from Loan Product. |
| Security Management | Support withholding of security deposits during loan release. |
Best Practices
- Verify loan details before processing disbursement.
- Ensure the correct bank account ledger is selected for fund release.
- Configure default disbursement accounts properly in Loan Product.
- Review security deposit settings according to lending policies.
- Maintain accurate disbursement records for loan accounting and reporting.
