Loan Security Type
Loan Security Type is used to classify securities or collaterals based on their category. It helps organizations define different types of assets that can be accepted as security against loans.
In Frappe Lending, Loan Security Types allow users to categorize securities such as stocks, bullion, property, and other collateral types while defining important parameters like haircut percentage and loan-to-value ratio.
Did You Know?
Defining security types with proper valuation parameters helps lending organizations maintain consistent risk assessment while processing secured loans.
Accessing Loan Security Type
To create or manage loan security types, navigate to:
Home > Lending > Loan Security > Loan Security TypeCreating a Loan Security Type
Follow these steps to add a new Loan Security Type:
- Open the Loan Security Type List.
- Click on Add Loan Security Type.
- Enter the required Security Type.
- Define the applicable Haircut Percentage.
- Enter the Loan-to-Value (LTV) Ratio.
- Save the record.
Note
Haircut and loan-to-value ratios help determine the eligible loan amount against the value of the pledged security.
Key Parameters in Loan Security Type
| Parameter | Description |
|---|---|
| Security Type | Defines the category of collateral, such as stocks, bullion, or property. |
| Haircut | Specifies the percentage reduction applied to the security value while calculating eligible loan limits. |
| Loan-to-Value Ratio | Defines the maximum loan amount that can be provided against the value of the security. |
Benefits of Using Loan Security Types
| Benefit | Description |
|---|---|
| Security Classification | Organize different collateral types based on their category and risk profile. |
| Risk Management | Apply predefined haircut and LTV values for consistent loan evaluation. |
| Loan Processing | Support accurate calculation of loan eligibility against pledged securities. |
| Standardization | Maintain consistent rules for evaluating different security categories. |
Best Practices
- Create separate security types for different categories of collateral.
- Define appropriate haircut and LTV values based on internal lending policies.
- Review security classifications periodically to align with risk management guidelines.
- Maintain accurate security type records for reliable loan evaluations.
