Loan Products

Beginning at the main screen, select Admin, then Products from the drop-down menu. This will launch the Products menu.

Select Loan Products.

fig 1.1: Loan Product

Create Loan Product

Details

fig 1.2: Details

Note: All red colored asterisk mark are mandatory fields.

Please refer above Details - Image, Below mentioned Details are updated with respect to the provided fields number's.

1 - Provide Loan Product name .(Mandatory)

2 - Provide Short name. (Mandatory)

3 - Provide description of this product.

4 - Select Fund source. Need to have defined required funds: Manage Funds.

5 - Provide Loan product Start date

6 - Provide Loan product Close date. Note - Loan product cant be used after this date.

7 - On checking the check box, it captures number of loan taken by customer.

Currency

fig 1.3: Currency

8 - Select Currency(Mandatory). Need to have defined required currency: Currency Configuration

9 - Provide Decimal places(Mandatory).

10 - Provide Currency in multiples of(Mandatory). This is to provide total amount rounding off. For ex: 10, so Total amount gets rounded of to 10's.

11 - Provide Installment in multiples of(Mandatory). This is to provide installment rounding off. For ex: 10, so Installment amount gets rounded of to 10's.

Terms

fig 1.4: Terms

Section A: Defining Loan term for normal loan product.

Note: - If your loan product is based on Loan cycle - Jump to Section B.

12 - Provide Principal(Loan) amount, Default field is a mandatory field. Minimum and Maximum are optional fields where in loan amount cant be provided beyond the min & max value.

Ex: Minimum: 5000, Default: 10000 & Maximum: 15000. At the loan account level default values will be shown.

13 - Provide Number of repayments, Default field is a mandatory field. Minimum and Maximum are optional fields where in no. of repayments cant be provided beyond the min & max value.

Ex: Minimum: 5, Default: 10 & Maximum: 15. At the loan account level default values will be shown.

14 - Provide Rate of Interest, Default field is a mandatory field. Minimum and Maximum are optional fields where in rate of interest cant be provided beyond the min & max value.

Ex: Minimum: 18, Default: 22 & Maximum: 24. At the loan account level default values will be shown.

15 - Select Per month or Per year for Rate of Interest.

Ex: Per year.

16 - Provide Repaid Every value

Ex: 1

17 - Select Day or Week or Bi-weekly or Month

Ex: Week

18 - This is an optional field. This could be used in-case, if you want to set "Minimum days between disbursal and first repayment date".

Ex: 10(Days), So if the loan disbursement is on Jan 1st and normal expected first repayment is on 8th Jan.

If you are providing 10 days as Minimum days between disbursal and first repayment date. Then first repayment will happen on 11th Jan.

Or

Section B: If your loan product is based on Loan cycle.

fig 1.5: Terms

19 - Check the check box to enable "Terms vary based on loan cycle".

20 - Provide values in principal section. Click on Add button to define Principal by loan cycle.

In the above image showing:

21 - Equals - Loan cycle as 1 with Principal Default amount of 10000. (If there was a one more cycle, it could be defined as Equals - loan cycle as 2 with principal amount)

22 - Greater than - Loan cycle as 1 with Principal Default amount of 20000. Greater than should always be used for the last cycle.

23 - Define Number of repayments by loan cycles in the same way.

Then continue defining other steps from Section A - 14 to 18.

Settings

fig 1.6: Settings

24 - Select Amortization: Depending upon the type of amortization you practice select one.

Equal Installments - All repayment amounts will be equal but the principal and interest amounts will vary with each repayment.

Or Equal Principal Payments - All principal amounts will be equal but the repayment and interest amounts will vary with each repayment.

25 - Select Interest method: Depending upon the type of interest method you practice select one.

Flat, For formula reference - Flat interest calculation

Or Declining Balance, For formula reference - Declining Balance Interest Calculation

26 - Select Repayment strategy: The repayment strategy determines the sequence in which each of the components is paid. For more information on Repayment strategies: Loan Product Fields - Repayment strategy.

27 - Select Interest calculation period:

Daily - Will Calculate the interest on DAILY basis ex: Month of February has 28days and it will calculate interest for 28days,

Or SAME AS REPAYMENT PERIOD- it calculates for the month,that is, 30days.

28 - Provide Moratorium(Optional):

On Principle Payment is '6' and the client's Repayment Frequency is every month, then for the first six months, the client has to pay Interest only and after six months the client starts paying principle amount too.

On Interest Payment is '6' and the client's Repayment Frequency is every month, then for the first six months, the client has to pay Principle only and after six months the client starts paying Interest amount too.

29 - Provide Interest free period(Optional): If the Interest Free Period is '4' and the client's Repayment Frequency is every week, then for the first four weeks the client need not to pay interest, he has to pay principle due for that week only.

30 - Provide Arrears tolerance(Optional): With 'Arrears tolerance' you can specify a tolerance amount and if the loan is behind (in arrears), but within the tolerance, it won't be classified as 'in arrears' and part of the portfolio at risk.

31 - Select Days in year: Depending upon your organizations financial days select respectively.

Actual - Will consider no. of days with respect to actual calendar. Or 360 days Or 364 days Or 365 days.

32 - Select Days in Months: Depending upon your organizations financial practice select respectively.

Actual - Will consider no. of days with respect to actual calendar. Or 30 days.

33 - Provide "Allow fixing of installment amount" (Optional): On checking the check box it enables providing the installment amount manually at the loan account level.

Ex: If the repayment amount every installment is 107 and you want to give it has 105. On providing 105 amount manually, it automatically adjusts the schedule for all the repayments.

34 - Number of days a loan may be overdue before moving into arrears(Optional): Loan Product Fields

35 - Maximum number of days a loan may be overdue before becoming a NPA - non performing asset (Optional): Loan Product Fields

36 - Account moves out of NPA only after all arrears have been cleared?: On checking the check box, Loans which are NPA will only moves out of NPA only after all arrears have been cleared.

37 - Principal Threshold (%) for Last Installment:

Interest Recalculation

fig 1.7: Interest Recalculation

38 - On checking the check box for "Recalculate Interest" - It will enable Interest recalculation. For more information on Interest recalculation refer - Interest Amount Recalculation for Loan Accounts

Guarantee Requirements

fig 1.8: Guarantee Requirements

39 - On checking the check box will enable "Place Guarantee Funds On-Hold".

40 - Mandatory Guarantee(%): This is to provide total % of loan amount as mandatory guarantee.

Ex: 20 %.

41 - Minimum Guarantee from Own Funds(%):

Ex: 10 % of loan amount from Own funds.

42 - Minimum Guarantee from Guarantor Funds(%):

Ex: 10 % of loan amount from Guarantor Funds.

Loan Tranche Details

fig 1.9: Loan Tranche Details

Note: If your loan product is tranche loan, then providing the details you could create product.

43 - Checking the check box will enable Multiple disbursal's.

44 - Provide the maximum number of disbursements allowed for a loan account.

45 - Provide maximum outstanding loan account balance at a point in time.

Configurable terms & settings

fig 1.10: Configurable terms & Settings

46 - By default "Allow overriding select terms and settings in loan accounts" is checked(Enabled).

If you don't want to allow over ridding for the mentioned categories, then you could un-check the box.

Charges

fig 1.11 Charges

In either to use Add charge, you should have already defined it in charges. For more information on charges refer here: Charges

Overdue Charges

fig 1.12 Overdue Charges

In either to use Add overdue charge, you should have already defined it in charges. For more information on charges refer here: Charges

Accounting

fig 1.13 Accounting

By default Accounting will be disabled - None:- Meaning If you are using this product for various transactions like disbursement,repayment,etc. these transactions are not passed in journal entry.

Enabling accounting for the loan product:-

>> You should have created chart of accounts, for info refer: https://conflux.atlassian.net/wiki/display/docs/Chart+of+Accounts+and+General+Ledger+Setup.

>> To enable Accounting, you need to select either one of the below account type, depending upon your organization accounting practice.

Cash
Accrual (periodic)
Accrual (upfront)

>> Map accounts with respect to the loan product accounts. For information on these accounts refer: A Possible accounting Spec - Accounting rules for loans.

fig 1.14 Accounting

Advanced Accounting Rule

On clicking on the show button it enables Advanced accounting rule.

If you click on Add button, it will expand and shows up selection drop-downs.

fig 1.15: Advanced Accounting

Configure Fund sources for Payment Channels.
As shown in the fig 1.16 all the payment types defined in Admin>>Organization>>Payment Types will be populated under Payment Type drop down and as shown in the fig 1.17 all the active or enabled assets defined in Accounting>>Chart Of Accounting will be populated under Fund Source drop down. In the below example the payment type credit card is configured with Saving Reference fund source. Similarly Cash can be configured for Loan Portfolio Fund source.

fig 1.16: Payment Type

fig 1.17: Fund Source

Map Fees to Income Accounts.

As shown in the fig 1.18 all the Fees defined in Admin>>Product>>Charges (except IsPenalty checked charges) will be populated under Fees drop down and as shown in the fig 1.19 all the enabled income defined in Accounting>>Chart Of Accounting will be populated under Income Account drop down. In the below example the Fees disbursement fees is mapped with Income from fees Income Account. Similarly QAProcessing Fee can be mapped for QA Processing Fee Income Account where the Journal entries happens with respect to the mapped Accounts.

fig 1.18: Fees

fig 1.19: Income Account (Fees)

Map Penalties to Specific Income Accounts

As shown in the fig 1.20 all the Penalty defined in Admin>>Product>>Charges (only IsPenalty checked charges) will be populated under Penalty drop down and as shown in the fig 1.21 all the enabled income defined in Accounting>>Chart Of Accounting will be populated under Income Account drop down. In the below example the Penalty OD Charges is mapped with Income for Overdraft Income Account. Similarly Penalty can be mapped for Income from Penalties Income Account where the Journal entries happens with respect to the mapped Accounts.

fig 1.20: Penalty

fig 1.21: Income Account (Penalties)

Map Write off Reason to Specific Expense Accounts

As shown in the fig 1.22 all the Write Off Reason defined in Admin>>System>>Manage Code>>WriteOffReasons will be populated under Write Off Reason drop down and as shown in the fig 1.23 all the enabled expense defined in Accounting>>Chart Of Accounting will be populated under Expense Account drop down. In the below example the Write Off Reason Fake is mapped with Loss Expenses Expense Account. Similarly Death can be mapped for Expense Due to Death Expense Account where the Journal entries happens with respect to the mapped Accounts.

fig 1.22: Write Off Reason

fig 1.23: Expense Account

Click on Submit button to Save/Create loan product.

View Loan Product

Go to Admin>>Product>>Loan Products

fig 1.24: View Loan Product

In the above image showing Loan products list.

Edit Loan Product

Go to Admin>>Product>>Loan Products>>Select loan product (Ex: Agriculture loan) >> then click on Edit button.

fig 1.25: Edit Loan Product

In the above image showing View - Loan products details aswell as you could Edit Loan product.

Finflux provides the ability to restrict loan account holding combinations not allowed by a financial institution. Use the Product Mix capability to define your financial institutions restrictions.

Key Error Messages

A loan account is a specific instance of a loan product, with a specified interest rate and an account number, and it is owned by a financial institution client.

Finflux User Manual