Loan Application To Repayment

This guide explains how to test a full loan flow from borrower setup through application, approval, account activation, disbursement, repayment, arrears review, collections, and accounting follow-up.

Use this example for individual or group lending where the institution needs a clear audit trail from credit request to cash movement and GL impact.

Workspace Reference

Workspace	How Users Reach It	What Users Usually Do There
Parties	Parties -> Individual Clients or Parties -> Groups	Create or confirm the borrower, guarantors, and related party records.
Loan Products	Loans -> Setup -> Products	Confirm product rules for amount, term, interest, security, fees, eligibility, and accounting.
Applications	Loans -> Operations -> Applications	Capture and review the borrower request before account activation.
Loan Accounts	Loans -> Operations -> Accounts	Activate, disburse, review schedule and balances, apply repayments, and manage account lifecycle actions.
Collections	Loans -> Operations -> Collections	Track delinquency, follow-up, promises, and recovery actions.
Payments And Accounting	Payments & Settlement and Accounting workspaces	Execute disbursement or receipt channels, reconcile movement, and review GL posting.
Reporting	Reporting -> Reports	Review PAR, portfolio, arrears, interest, repayment, and profitability reports.

Scenario

Grace Achieng applies for a working-capital loan.

The lending team must:

• confirm Grace as an approved client
• select the right loan product
• capture requested amount, term, purpose, collateral, and guarantors where required
• submit and approve the application
• activate the loan account
• disburse funds through the configured payment channel
• collect the first repayment
• review interest, arrears, collections, and reporting
• confirm accounting posted as expected

End-To-End Flow

Step	Workspace	Business Meaning
1	Parties	Borrower, guarantors, and group context are confirmed.
2	Loan Product Setup	Product rules are checked before the application is captured.
3	Applications	Borrower demand and credit review evidence are recorded.
4	Approval	Credit decision is made through configured workflow.
5	Loan Accounts	Approved demand becomes an account with balances and schedule.
6	Disbursement	Funds are released using approved channel and accounting setup.
7	Interest And Charges	Product rules calculate interest, fees, penalties, or accruals.
8	Repayment	Borrower payment reduces balance according to allocation rules.
9	Collections	Overdue or watched accounts receive follow-up tasks and actions.
10	Reporting And Accounting	Finance and managers review portfolio, cash, GL, and risk outcomes.

1. Confirm Borrower And Related Parties

Open Parties.

Confirm:

• borrower identity is active and approved
• contact information is current
• KYC or eligibility details are complete
• guarantors exist where required
• group membership is current for group or hybrid group lending
• payment or disbursement destination is known where the loan pays out through a channel

Important party checks:

Field Or Detail	Why It Matters
Client or group name	Main borrower identity used on applications and accounts.
Holder structure	Determines whether the application is individual, group, or hybrid group.
Contact details	Supports collections, notifications, and follow-up.
Guarantor records	Needed when product rules require guarantors.
Share or collateral ownership	Needed when security is share-backed or asset-backed.

2. Confirm Loan Product Readiness

Open Loans -> Setup -> Products.

Before creating the application, confirm:

• product is active
• borrower holder type is allowed
• amount and term limits are correct
• interest method and repayment schedule are understood
• collateral, guarantor, or share-pledge requirements are configured
• fees and pricing are approved
• disbursement and repayment channels are understood
• GL mappings are ready

Important product checks:

Field Or Setting	User Impact
Product Type	Controls schedule behavior, tranche behavior, revolving behavior, or interest-free behavior.
Minimum and Maximum Amount	Blocks applications outside product limits.
Interest Method and Rate	Determines how interest is calculated.
Repayment Schedule Method	Controls fixed or dynamic repayment schedule behavior.
Security Requirements	Determines collateral, guarantor, or share-pledge requirements.
Pricing Profile	Controls fees, charges, and product-specific pricing behavior.
Accounting Method	Determines cash, accrual, or other finance behavior.

3. Capture Loan Application

Open Loans -> Operations -> Applications.

Use the create action for a new application.

Important application fields:

Field	Meaning For The Test Flow
Loan Product	Product Grace is applying for. It controls rules and validations.
Holder Type	Individual, group, or hybrid group borrower structure.
Individual, Group, or Members	The borrower or participants receiving the loan.
Requested Amount	Principal requested. Must fit the product range and security rules.
Term or Repayment Details	Expected repayment period and schedule basis.
Collateral	Security asset where required.
Share Pledge	Share balance pledged where share-backed lending is enabled.
Guarantors	People guaranteeing the loan where required.
Loan Purpose and Sector	Business reason and reporting classification.
Notes or Documents	Supporting evidence for credit review.

Expected test result:

• the application can be saved only when required product-controlled fields are complete
• product rules prevent invalid amount, holder type, missing security, or missing guarantors
• the application remains separate from an active account until approval

4. Review And Approve

Submit the application according to workflow.

Approvers should review:

• borrower identity and eligibility
• product fit
• requested amount and term
• collateral or guarantor completeness
• purpose and sector
• affordability or credit score where used
• approval notes

Use Approve, Return, or Reject according to the credit decision. Do not activate an account from a request that still has unresolved credit questions.

5. Activate Or Review The Loan Account

Open Loans -> Operations -> Accounts.

After approval, confirm the loan account exists or is created according to the configured process.

Important account fields and checks:

Field Or Detail	Meaning
Account Number	Main account reference used for disbursement, repayment, collections, and reporting.
Loan Product	Product whose rules govern the account.
Borrower	Client, group, or hybrid members responsible for the loan.
Principal Amount	Approved loan amount.
Interest Rate	Rate applied to the account.
Repayment Schedule	Expected installment dates and amounts.
Account Status	Controls whether disbursement, repayment, closure, or recovery actions are allowed.
Balance Summary	Principal, interest, fees, penalties, arrears, and outstanding amount.

6. Disburse Funds

Use the account disbursement action where available.

Before disbursement:

• approval is complete
• account status allows disbursement
• disbursement amount is correct
• payout channel or destination is correct
• product and GL setup are ready
• finance review requirements are complete

Expected test result:

• disbursement creates the expected account balance
• the borrower receives funds through the approved process
• accounting shows the loan asset and cash, bank, wallet, or clearing movement according to setup

7. Review Interest And Schedule

Open the loan account detail and review schedule, interest, fees, penalties, and accrual behavior.

Check:

• installment dates match the product configuration
• interest amount is reasonable
• fees and charges are visible where expected
• accrual behavior matches product accounting method
• variable-rate products use the expected index and spread

If the schedule is wrong, review product setup before correcting account-level values.

8. Record Repayment

Use the repayment action in Loans -> Operations -> Accounts or the relevant teller/payment workflow available to your role.

Important repayment fields:

Field	Meaning
Loan Account	Account receiving the repayment.
Payment Amount	Amount paid by the borrower.
Payment Date	Date used for repayment and finance review.
Payment Channel	Cash, bank, wallet, mobile money, transfer, or other configured rail.
Allocation Order	How the repayment is applied to principal, interest, fees, penalty, or suspense where configurable.
Reference	Receipt, teller, bank, mobile-money, or internal reference.
Notes	Explanation for partial payment, early payment, exception, or correction.

After repayment, confirm:

• outstanding balance changed correctly
• schedule or arrears updated as expected
• payment appears in account history
• posting status is successful or pending review

9. Test Arrears And Collections

If testing overdue behavior, let an installment become overdue or use a controlled test account.

Open Loans -> Operations -> Collections.

Check:

• arrears bucket or days past due are correct
• collection case or follow-up can be logged
• promise-to-pay, visit, call, or note is captured
• next action and owner are clear
• PAR and portfolio reports reflect the account

Do not use collections as a substitute for correcting a wrong schedule or payment. Fix source data first.

10. Review Accounting And Reports

Review:

Area	Question It Answers
Loan account detail	Did disbursement, interest, repayment, and balance update correctly?
GL Journals	Did disbursement and repayment post to expected accounts?
Back-Office Posting	Are there failed or pending accounting items?
Collections	Is arrears follow-up visible and assigned?
PAR Report	Does portfolio-at-risk reflect overdue status?
Portfolio Analytics	Do balances, risk, and product totals look correct?

Pass Criteria For The Test Flow

The flow is complete when:

• borrower and required related parties are approved
• product validations are enforced on the application
• application approval is separate from account activation
• disbursement updates account balance and accounting
• repayment updates balance, schedule, and history
• overdue behavior appears in collections and reporting when tested
• GL and operational screens tell the same story

Common Problems

Problem	What To Check
Application cannot save	Product, holder type, amount range, required collateral, guarantors, and purpose fields.
Account cannot disburse	Approval status, account status, disbursement amount, channel setup, and GL setup.
Repayment allocation looks wrong	Product allocation rules, arrears state, fees, penalties, and suspense behavior.
Interest is unexpected	Product interest method, rate, schedule method, accrual method, and index/spread setup.
PAR report differs from account	Arrears update, business date, repayment status, and portfolio snapshot timing.

Related Guides

• Loans Overview
• Loan Products
• Loan Applications
• Loan Accounts
• Loan Collections
• Loan GL Setup