Loan
Loan Booking refers to the process of officially recording an approved loan in the financial institution’s system after the loan terms have been finalized. It marks the point where the loan becomes an active financial obligation for both the lender and the borrower.
In Frappe Lending, Loan records help manage the complete loan lifecycle, including loan creation, repayment schedules, moratorium periods, revolving credit limits, and loan account management.
Did You Know?
Loan booking is the foundation of loan management, as all subsequent activities such as disbursements, repayments, interest calculations, and account tracking are linked to the Loan record.
Accessing Loan
To create or manage loans, navigate to:
Home > Lending > Loan > LoanPrerequisites
Before creating a Loan, ensure the following records are available:
- Applicant (Customer, Employee, or Member)
- Company
- Loan Product
Note
Loan Product must be configured before creating a Loan, as it defines the loan terms, accounting settings, and repayment rules.
Creating a Loan
Follow these steps to create a new Loan:
- Open the Loan List.
- Click on Add Loan.
- Enter loan details such as Loan Product, Applicant, Tenure, Posting Date, and other required information.
- Save the record.
Repayment Frequencies
Frappe Lending allows users to define repayment frequencies based on their lending requirements. The selected frequency determines how the repayment schedule is generated.
| Repayment Frequency | Description |
|---|---|
| Monthly | Repayments are scheduled once every month. |
| Weekly | Repayments are scheduled every week. |
| Bi-weekly | Repayments are scheduled twice a month. |
| Quarterly | Repayments are scheduled once every quarter. |
| One Time | The complete repayment is scheduled as a single payment. |
Adding Moratorium During Loan Booking
A moratorium is a temporary period during which loan repayments are postponed. It provides borrowers additional time before regular repayment obligations begin.
During loan booking, users can define the Moratorium Tenure and select the required Moratorium Type.
Moratorium Types
| Moratorium Type | Description |
|---|---|
| EMI | Both principal and interest payments are not applicable during the moratorium period. |
| Principal | Only the principal component is postponed, while interest payments continue during the moratorium period. |
Note
Moratorium settings allow lending institutions to provide flexible repayment options based on borrower requirements and applicable policies.
Revolving Limits for Line of Credit Loans
Revolving limits in Line of Credit (LOC) loans define the maximum credit amount available to a borrower that can be used repeatedly.
Borrowers can withdraw funds up to the approved limit, repay the borrowed amount, and access the available credit again without creating a new loan. This makes revolving credit suitable for flexible borrowing requirements.
| Feature | Description |
|---|---|
| Credit Limit | Defines the maximum amount a borrower can access under the line of credit. |
| Repeated Usage | Allows borrowers to draw and repay funds multiple times within the approved limit. |
| Flexible Borrowing | Provides access to funds without creating a new loan application each time. |
Loan Account Freezing (Death Marking)
If a borrower passes away or becomes unable to continue repayments due to exceptional circumstances, the loan account can be frozen.
When a loan account is frozen:
- Interest accrual stops.
- Demand generation stops.
- Further loan processing activities are restricted.
Best Practices
- Verify all applicant and loan product details before booking a loan.
- Configure repayment frequency according to the loan agreement.
- Use moratorium settings carefully based on approved lending policies.
- Review revolving limits periodically for line of credit loans.
- Freeze loan accounts only after proper verification and approval.
