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Loan Setup
Loan setup defines the products and behavior used by loan applications and accounts.
Workspace Reference
Open Loans -> Setup -> Products, then use Loan Products. Users with permission can use Create Loan Product to open the product form, or use row actions to view details, edit settings, manage versions, activate, deactivate, or review supporting configuration.
Loan product setup should be completed before branches start capturing applications. A loan application inherits product rules, so incorrect setup will affect eligibility, amount validation, repayment schedules, interest treatment, fees, accounting, and disbursement controls.
Loan Products
A loan product controls pricing, schedule behavior, repayment rules, interest behavior, fees, collateral expectations, accounting behavior, and operational restrictions.
Important setup areas include:
- Product identity and eligibility.
- Interest calculation and application method.
- Accounting method.
- Repayment schedule behavior.
- Fees and charges.
- Penalties and arrears behavior.
- Collateral requirements.
- Disbursement behavior.
- Approval and accounting configuration.
Loan Product Form Areas
| Form Area | Important Fields | What They Mean |
|---|---|---|
| Product identity | Product name, product type, description, active status. | Names the product users select during application capture and determines which product-specific controls appear. |
| Amount and term | Default loan amount, minimum amount, maximum amount, term limits, tranche settings where applicable. | Controls how much can be requested and whether the loan is single-disbursement, tranched, or revolving. |
| Interest | Interest type, interest calculation method, interest application method, rate settings. | Determines how interest is calculated, shown on schedules, accrued, and recognized. |
| Fees, charges, and penalties | Fee rules, penalty settings, tax behavior, arrears behavior. | Controls what borrowers are charged during application, disbursement, repayment, arrears, and closure. |
| Repayment allocation | Payment method, repayment allocation order, custom allocation settings, rounding behavior. | Determines how money received is applied across principal, interest, fees, penalty, and other balances. |
| Security settings | Collateral enabled, guarantors enabled, required guaranties, investor-fund settings where used. | Determines whether application users must capture collateral, guarantors, or funding commitments. |
| Availability | Business units, customer type eligibility, account initial state, future payment behavior. | Controls where the product can be used and which borrower structures can access it. |
| Product references | ID pattern, configuration package, currency, pricing profile. | Connects the product to numbering, packaged settings, currency, and reusable pricing rules. |
| Accounting references | Principal control account, interest receivable account, interest income account, write-off, provision, recovery, and GL rules. | Allows loan disbursement, accrual, repayment, write-off, provisioning, and recovery activity to produce controlled financial records. |
WARNING
Do not activate a product until finance has confirmed the principal, interest, write-off, provision, recovery, pricing profile, and GL rule selections. Once real accounts are created, changing product accounting behavior can create reporting differences that require controlled migration.
Interest And Accounting Method
Interest behavior and accounting method are related but not the same thing.
Interest settings determine how the system calculates and applies interest to the loan account.
Accounting method determines when income is recognized in accounting reports. Accrual accounting recognizes interest income when it is earned. Cash-basis accounting recognizes income when cash is received, unless the product is specifically configured for a different treatment.
Administrators should explain the selected behavior to finance users so income reports are interpreted correctly.
Product Setup Dependencies
Before a product can be used cleanly, these supporting records should already exist:
| Dependency | Why It Matters |
|---|---|
| Chart of accounts | Product accounting fields need approved control, income, expense, liability, and recovery accounts. |
| GL posting rules | Product events need configured debit and credit lines for financial posting. |
| Pricing profiles | Reusable pricing lines prevent each product from inventing its own charge logic. |
| Currencies | The product currency controls lookup filtering, schedules, settlement, and reporting. |
| ID templates | Account and product references need predictable user-facing numbering. |
| Business units | Product availability can be limited to selected branches or operating units. |
| Collateral, guarantor, purpose, and sector setup | Application capture uses these records when the product requires them. |
Setup Checklist
Before enabling a loan product:
- Confirm the interest method matches the lending policy.
- Confirm accounting behavior matches finance policy.
- Confirm fees and penalties are understandable to users.
- Confirm disbursement and collection channels are available.
- Confirm approval rules are in place.
- Test application, disbursement, interest, repayment, and accounting outcomes.