Disbursement Functionalities
OBJECTIVE
In this section of the manual, you will know about different disbursement functionalities.
What do you understand by Disbursement?
A disbursement refers to the release or distribution of funds from an account or loan to a recipient or beneficiary. It is the act of transferring money or making a payment to fulfill a financial obligation or meet a specific purpose.
The following steps need to be followed for Disbursement Functionalities on new UI:
Log-in to the instance with the user Id and password and you will see the below screen. Select any customer for whom you want to add new loan.
2. Once you select a customer, you will see the below screen. Click on ‘Loan Accounts’. Then select any active loan account to proceed.
3. Once you click on any active loan account (for example: Vehicle), you will see the below screen containing various tabs. Click on the three dots at the right corner of the page, you will get various options to choose from. Select any one and proceed. It contains the following options:
1. Foreclosure
Foreclosure results when a borrower fails to repay their loan according to the agreed-upon terms.
For Example: John took a loan of $200,000 from a bank to buy a house. He couldn't make the mortgage payments due to a job loss, leading to default. The bank initiated foreclosure, legally repossessed the house, and sold it to recover the remaining debt.
When you click on ‘Foreclosure’, you will see the below screen. Fill all the mandatory fields as required and click on ‘Submit’ button.
2. Waive Interest
Waive Interest results in forgiving or relinquishing the interest that would normally be charged on the loan amount.
For Example: When Jane couldn't make her credit card payments on time, the financial institution agreed to waive the additional interest charges. This helped her by freezing the total amount she owed, giving her temporary relief from accumulating more debt.
When you click on ‘Waive Interest’, you will see the below screen. Fill all the mandatory fields as required and click on ‘Submit’ button.
3. Waive Charges
Waive Charges results in not imposing certain fees or expenses that would typically be associated with the loan.
For Example: When Mark accidentally overdrafted his bank account, the institution agreed to waive the $35 penalty fee, meaning they canceled the charge, providing him with financial relief.
When you click on ‘Waive Charges’, you will see the below screen. Fill all the mandatory fields as required and click on ‘Submit’ button.
4. Write-off
Write-off results when the lender no longer expects to receive repayment of the outstanding loan amount from the borrower.
For Example: When Alex couldn't repay a $1,000 loan due to financial difficulties, the bank decided to write off the loan. This means they accepted that they won't be able to collect the money and removed the debt from their books, considering it as a loss.
When you click on ‘Write-off’, you will see the below screen. Fill all the mandatory fields as required and click on ‘Submit’ button.
5. Add Loan Charge
Loan Charge results in a fee or interest payment that a borrower pays to a financial institution in return for the use of borrowed funds. It represents the cost of borrowing. Charges such as processing fee or any other charges can be added.
For Example: When Sarah takes a $10,000 personal loan, the bank adds a 2% charge to the outstanding balance each year for processing and administrative fees. This charge accumulates annually, increasing the amount she owes over time.
When you click on ‘Add Loan Charge’, you will see the below screen. Fill all the mandatory fields as required and click on ‘Submit’ button.
6. Reschedule
Reschedule results when the terms and conditions of the loan agreement are modified to accommodate a new repayment schedule.
For Example: When Mark faced financial difficulties, the bank agreed to reschedule his mortgage payments. They modified the loan terms such as extending the repayment period or adjusting the monthly installments to better suit his situation, providing him with temporary relief and making the payments more manageable.
When you click on ‘Reschedule’, you will see the below screen. Fill all the mandatory fields as required and click on ‘Submit’ button.
7. Update ROI
Update ROI (Rate of Interest) results in the interest rate charged on loans or earned on investments and deposits.
For Example: When Sarah had a fixed-rate loan at 4%, the bank informed her that they would update the interest rate to 5%. This meant her monthly payments increased, and she would pay more in total interest over the remaining loan term due to the higher rate.
When you click on ‘Update ROI’, you will see the below screen. Fill all the mandatory fields as required and click on ‘Submit’ button.
8. SOA
Statement of Account results in a document/report that provides a summary of financial transactions and activity related to a loan or any other account.
For Example: Let's say John has a savings account with a bank. At the end of each month, the bank generates a statement of account for John which provides a summary of John's financial activities within that month. It includes details such as deposits made, withdrawals, interest earned, fees charged, and any other transactions that occurred during that period.
When you click on ‘Statement of Account’, you will see the below screen. Fill all the mandatory fields as required and click on ‘Submit’ button.
9. Undo Disburse
Undo Disbursal results in all transactions and entries pertaining will be reversed.
For Example: Let's say Jane applied for a personal loan from a bank and was approved. The bank disbursed the loan amount of $10,000 into Jane's bank account. However, shortly after receiving the funds, Jane realized that she no longer needs the loan. Jane contacts the bank and requests to undo the disbursal. In this scenario, the bank reverses the transaction and retrieves the disbursed funds from Jane's account. The loan agreement is canceled, and Jane is not responsible for repaying the borrowed amount.
When you click on ‘Undo Disburse’, you will see the below screen. Fill all the mandatory fields as required and click on ‘Submit’ button.
10. Refund
It results in return of funds to the borrower or the adjustment of loan amounts.
For Example: Let's say Sarah purchased a product from an online retailer using her credit card. However, when the product arrives, she decides to return it. Sarah contacts the retailer and requests a refund. In this case, the retailer returns the purchase amount to Sarah's credit card account. The financial institution that issued Sarah's credit card then credits the refunded amount back to her account.
11. Pay Charges
It results when borrower make payments to cover various fees or expenses associated with the loan.
For Example: When John receives his credit card statement with the total amount of charges, he is required to make a payment to the financial institution. By paying the charges, he settles his financial obligation. He can choose to pay the full statement balance or a minimum payment. If John pays the full balance, he clears all the charges. If he makes only the minimum payment, he carries forward the remaining balance, incurring interest charges on the unpaid amount.
12. Apply Penalty
It results in imposing a financial punishment or consequence on the borrower for violating the terms and conditions of the loan agreement.
For Example: Let's say Sarah has a checking account with a bank, and she writes a check for an amount greater than her available balance. As a result, the bank applies a penalty fee for the overdraft. This penalty fee serves as a consequence for the overdraft. The penalty fee is then deducted from Sarah's account balance, increasing the overall amount she owes to the bank. It appears as a separate transaction on her account statement, reflecting the applied penalty.
13. Tranche Disbursement
It results when the loan amount is divided into multiple installments or tranches, and each tranche is disbursed at different intervals or stages.
For Example: If a construction company receives a $1 million loan, the bank may disburse $250,000 at the project's start and release subsequent portions as the project reaches specific milestones. This process continues until all tranches are disbursed, usually linked to achieving predetermined project milestones. Each tranche represents a portion of the loan amount that is released by the bank as the project progresses.