Loan Demand
Loan Demand is a formal request generated by the lender requiring the borrower to pay the amount due on a loan. It represents the stage at which the scheduled principal, interest, penalties, or other applicable charges become payable.
In Frappe Lending, loan demands are generated automatically when a loan reaches its scheduled repayment date. The system can also generate demands manually through the Loan Demand Process whenever required.
Did You Know?
When an interest demand is generated, the accrued interest is transferred from the accrued interest account to the customer receivable account, making it officially due for collection.
How Loan Demand Works
Loan demands are created automatically based on the repayment schedule associated with the loan. Once the scheduled payment date is reached, the system generates the applicable demand for the borrower.
If required, users can also generate demands manually by running the Loan Demand Process.
Note
Automatic demand generation ensures borrowers are billed according to the repayment schedule without requiring manual intervention.
Components of a Loan Demand
| Component | Description |
|---|---|
| Principal | The scheduled portion of the original loan amount due for repayment. |
| Interest | The interest amount that has become payable for the current repayment period. |
| Penalty | Additional charges applied for overdue repayments, where applicable. |
| Other Charges | Any applicable fees or charges associated with the loan. |
Automatic Demand Generation
The system automatically generates loan demands when:
- The scheduled repayment date is reached.
- The repayment schedule indicates that a payment is due.
- Outstanding principal, interest, penalties, or charges become payable.
Manual Loan Demand Process
In situations where automatic processing is not sufficient, users can manually execute the Loan Demand Process to generate pending loan demands.
Accounting Impact
When an interest demand is generated, the accounting treatment changes as follows:
| Stage | Accounting Behavior |
|---|---|
| Interest Accrual | Interest is recognized as accrued income and recorded in the accrued/receivable account. |
| Demand Generation | The accrued interest amount is transferred to the customer receivable account, making it payable by the borrower. |
Benefits of Loan Demand
| Benefit | Description |
|---|---|
| Automated Billing | Generates repayment demands automatically according to the loan schedule. |
| Accurate Accounting | Transfers accrued interest to customer receivables when it becomes due. |
| Repayment Tracking | Helps monitor outstanding principal, interest, penalties, and charges. |
| Operational Efficiency | Reduces manual effort by automating the demand generation process. |
Best Practices
- Ensure repayment schedules are generated before processing loan demands.
- Run the Loan Demand Process only when manual demand generation is required.
- Regularly review generated demands to identify overdue repayments.
- Monitor customer receivable balances after demand generation for accurate collection tracking.
