Introduction to Loans

Loan

A loan is a transfer of money from one party to another with an agreement by the receiving party to pay it back. The recipient, or borrower, incurs a debt and is usually required to pay interest for the amount of money borrowed.

To create a loan account, the Client must be onboarded first and should be activated. Before approving a loan request, the financial institution has to complete the risk assessment for individual Clients. Loan products should be set up by the organization with details regarding interest rate, repayment duration, fund source, repayment strategy etc. A loan request would be directly linked to one of the loan products for which the Client is eligible or opted.

Loan Product Set Up:

As a prerequisite, the organization configures loan products based on requirements for various types of loans, such as secured and unsecured loans. This includes secured-term loans, automobile loans, mortgages, and short-term "Buy Now Pay Later" loans. There will be options available for Platforms to change, update or define the repayment strategy and interest calculation strategy. More details on loan product setups can be found. here

Client Onboarding:

The organization performs the KYC (Know Your Customer) process and the Client will be validated if they are eligible for banking services. Please refer to Client Onboarding for more details.

Create Loan Account:

After a successful client onboarding, the loan application is submitted along with the proposed loan amount. The back-office user can override the proposed amount, interest rate, loan terms, and other details. Additionally, a savings account can be linked during loan account creation which can be used for disbursal or repayments. The API reference can be found here

Approve Loan Account:

The approval for a loan is done by a banking officer who has the freedom to override the proposed amount. The expected date of disbursal will be set while approving the loan.

The API reference can be found here

Disburse Loan:

Once the loan is approved and the disbursal date is set, the loan can be disbursed on or after the specified date, after deducting any applicable disbursement charges or other fees decided at loan application approval. The funds can be disbursed either to a linked savings account or an external account via various payment methods such as check or ACH transfer. Pre-defined fixed equated instalment amount will be communicated to clients for recurring repayments.

API reference - disburse to account and disburse

Repayment :

Mbanq provides options to repay loans directly to the loan account or transfer funds from a savings/checking account. A scheduled auto repayment facility is also available, allowing clients to set up recurring payments from designated accounts. In addition to scheduled repayments, clients have the flexibility to repay the entire loan or partial amounts at any time, according to the agreed-upon terms of the loan product.

API reference can be found here

Loan Closure:

Loans can be closed with normal repayment or have the option of pre-closure of loans along with some pre-closure charges, as per the product agreements.