Create a Lending Product

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Create a Lending Product

A Lending Product in CL Loan is a template used to define the loan and line of credit offerings of a company. The lending product defines the rules, default settings, and constraints for your lending offerings. The record type identifies the lending product type. Within each lending product type, you can then create the lending products. You can apply a lending product to any number of loan contracts. 

CL Loan supports the following types of lending products: 

  • Loan – A lending institution provides a fixed sum of money to a borrower for a fixed period of time that needs to be repaid in equal installments as per a specified schedule. Most loans do not require a collateral to be pledged against the loan amount.

    Note:

    For more information on creating a simple loan product, see Create a Simple Loan Product section in CL Loan User Guide for Simple Loans.

  • Amortization (AMZ) Based Loan – A lending institution provides a fixed sum of money, and the borrower pays back the amount in a series of equal monthly payments of the principal along with an interest amount that is calculated based on the unpaid principal balance(UPB) for each month.

    Note:

    For more information on creating an amortization based product, see Amortization Based Loan Products section in CL Loan User Guide for Amortized Loans.

  • Flexible Amortization (F-AMZ) Based Loan - An Amortization based loan product with some behavioral differences.

    Note:

    For more information on creating flexible amortization based loans, see Amortization Based Loan Products section in CL Loan User Guide for Amortized Loans.
    For more information on the flexible amortization based loans, see Behavior of Flexible Amortization Based Loan Products section in CL Loan User Guide for Amortized Loans.

  • Line of Credit – A lending institution provides a flexible loan to an individual or business. It is an approval to use a fixed amount of money over time based on the borrower's needs. This can involve a commitment fee, or interest payment on the borrowed amount. The borrower can draw a partial amount or up to the maximum loan balance (the credit limit) at any point. Interest is charged only on the availed part of the credit line.

    Note:

    For more information on creating a line of credit product, see Create a Line of Credit Product section in CL Loan User Guide for Line of Credit.

  • Merchant Cash Advance - A lump sum is paid to a business in exchange for percentage of future credit card and or debit card sales. Merchant cash advance functionality is reserved for future.

  • Master Loan – A lending institution can get into complex loan agreements with the customers where each drawdown may have its own unique attributes, such as interest rate, amortization term, repayment profile, payment frequency and more. All these drawdowns may have some common terms and conditions because of which they can be signed and disbursed under a single loan facility that can be sanctioned to the borrower. The master parent loan can be created as an umbrella facility under which each disbursement can be booked as a separate child loan. Each child loan can have its own bills and every child loan that is repaid ultimately updates the balances on the master. A child loan can either be a Simple Loan or an F-AMZ loan.

    Note:

    For more information on creating a master loan product, see Create a Master Loan Product section in CL Loan User Guide for Master Loan.

Amortization Based Loans versus Regular Loans

Amortization based loans differ from regular loans in the following ways:

  • Payoff - In case of a regular loan, daily interest accrual occurs. Hence, the payoff amount is calculated as - Principal remaining, interest remaining, fees remaining, and interest accrued since last accrual date. In AMZ based loans, instead of daily basis, interest is posted only on the due date. Therefore, interest is charged only up to the last interest posting date, in each bill. The payoff amount, in this case, is the entire balance as per the repayment schedule for the remaining tenure.  The Flexible AMZ loan mirrors the regular loan behavior in case of payoff.

  • Repayment Schedule - In regular loans, payments progress as per the repayment schedule if payment is received as per schedule and exact due amount. If payment is received pre or post the due date, or for less or more amount than the bill amount, the schedule changes subsequent to such a payment. Lender can reschedule the loan at that time, and generate the new schedule as per the current loan state. Or, lender can follow the bills and payments as-are and adjust the difference in the last bill amount. Amortization based loans, on the other hand, adhere strictly to the repayment schedule. If payment received is higher than the due amount, the difference is maintained as Excess amount. Even if a payment is received after the due date, the borrower is still charged only the Principal+Interest amount as per the repayment schedule. That is, only the interest accrued up to the bill date is charged.

    Note:

    Lenders on earlier versions of CL Loan must continue to use the Amortization Based Loan product type for existing and new AMZ loan contracts. Or, they can migrate their existing AMZ contracts to Flexible AMZ by contacting CLS.
    For new customers implementing CL Loan, it is recommended to use the Flexible AMZ Loan product type to leverage the additional functionality expected in the future. 
    The terms and conditions for servicing the contract vary across lending products.

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