Loan Repayment
Loan Repayment is the process of repaying the borrowed loan amount along with applicable interest, penalties, and charges according to the agreed repayment schedule. Repayments may be made as regular installments, advance payments, prepayments, settlements, or recovery payments depending on the loan status and repayment type.
Frappe Lending supports flexible repayment processing with configurable collection priorities, automated schedule adjustments, and validations to ensure repayments follow the organization’s lending policies.
Did You Know?
Frappe Lending automatically allocates repayments across principal, interest, penalties, and charges based on configurable Collection Offset Sequences, ensuring consistent and transparent payment allocation.
Accessing Loan Repayment
To create or manage loan repayments, navigate to:
Home > Lending > Disbursement and Repayment > Loan RepaymentCreating a Loan Repayment
Follow these steps to record a repayment:
- Open the Loan Repayment list.
- Click Add Loan Repayment.
- Select the Loan Account.
- Choose the appropriate Repayment Type.
- Enter the repayment amount.
- Save and Submit the repayment.
Collection Offset Sequences
A Collection Offset Sequence defines the order in which received payments are allocated to different loan components such as principal, interest, penalties, and charges. This ensures consistent allocation, particularly for partial repayments.
Frappe Lending supports separate offset sequences for different loan conditions:
| Asset Type | Purpose |
|---|---|
| Standard Assets | Used for regular performing loans. |
| Sub-standard Assets | Used for Non-Performing Asset (NPA) loans. |
| Settlement Collection | Used when processing full or partial settlement repayments. |
| Written Off Assets | Used for recoveries on written-off loans. |
Note
The repayment allocation sequence is first taken from the Loan Product. If no sequence is configured there, the system automatically uses the corresponding Company-level Collection Offset Sequence.
Advance Payment and Prepayment
Borrowers may repay more than the scheduled installment amount. Depending on the payment amount and repayment type, Frappe Lending processes the payment as either an Advance Payment or a Prepayment.
| Repayment Type | Description |
|---|---|
| Advance Payment | Applied when the repayment is marked as Advance Payment and the excess amount generally falls between one and two EMI amounts. Future installments are adjusted according to advance payment rules. |
| Prepayment | Applied when the excess payment falls outside advance payment criteria. The additional amount is typically adjusted against the principal, and the repayment schedule is recalculated. |
For both repayment types, the EMI amount usually remains unchanged, while the loan tenure or final installment is adjusted based on the repayment.
Repayment Validations
Frappe Lending performs several validations before accepting a repayment to ensure policy compliance.
| Validation | Description |
|---|---|
| Loan Status Restrictions | Allowed repayment types depend on the loan status. Closed, Written Off, and Fully Settled loans have specific repayment restrictions. |
| Backdated Settlement | Full Settlement cannot be recorded with a value date earlier than the latest repayment or disbursement date. |
| Waiver Validation | Interest, penalty, or charge waiver amounts cannot exceed the corresponding overdue balances. |
| Normal Repayment Validation | If enabled in the Loan Product, Normal Repayment cannot exceed the currently payable amount. |
| Security Deposit Adjustment | Adjustment amount cannot exceed the available security deposit or payable amount. |
Line of Credit (LoC) Repayments
For Line of Credit loans, repayments can be linked to a specific loan disbursement. Allocation, repayment schedule updates, and validations are performed at the individual disbursement level whenever applicable.
Auto-close and Auto-waiver
During repayment, the system evaluates outstanding balances against the Loan Product configuration. If the remaining balance falls within configured thresholds, Frappe Lending can automatically complete the loan closure process.
Depending on the outstanding component, the system may automatically create one of the following entries:
- Interest Waiver
- Penalty Waiver
- Charges Waiver
- Principal Adjustment
Write-off Recovery
For loans that have been written off, repayments follow recovery-specific allocation rules. The system allocates payments while considering pending waivers, accrued amounts, and recovery balances to ensure accurate recovery tracking and accounting.
Best Practices
- Configure Collection Offset Sequences before processing repayments.
- Use Loan Product settings to control repayment validations and auto-close behavior.
- Verify repayment type before submission to ensure correct schedule recalculation.
- Review waiver amounts carefully, as they cannot exceed outstanding dues.
- For Line of Credit loans, associate repayments with the appropriate disbursement whenever possible.
