Processing Loan Repayments

Based on defined product pricing and established parameters, financial institutions can manage the billing and collection process on a loan contract fully automatically. Once the disbursement is performed, Core Banking generates the repayment schedule and sends the payment notifications to the customer on the due date. Automated collection is triggered via integration with 3rd party payments engine or from the customer's settlement account. If funds are not available, overdue amounts and days are calculated and penalties applied.

Once a loan approved and disbursed, you can check the repayment schedule built based on contract details, on the Payments tab, in the designated section, as described in the Viewing a Contract's Repayment Schedule topic. If there are front-end fees, they are notified automatically by Core Banking and you can check them on the Payments tab, in the Repayment Notifications section (even without disbursing the funds). Read about repayment notifications in the Managing Repayment Notifications topic.

When the system reaches the dates that appear on schedule projections, the amounts resulting are made due, and Core Banking automatically triggers the notifications. Depending on the availability of funds in the settlement account and the direct debit setup, Core Banking settles those notifications, marking them with the Recovered status. Any amount that is not recovered on due date stays on the notification, and when funds become available, Core Banking automatically recovers and allocates them to the pending notifications based on the Payment Allocation Method setup at the product level, in the Lean Core tab. When the notifications are recovered, you can see the underlying debit transactions on the settlement account – there is always such traceability of the funds. You can also see the automatic payments performed by Core Banking either at contract level or in a dedicated menu, as described in the Viewing Customer Payments topic.

Payment Schedule Types, defined at the Banking Product Factory level, define how Core Banking handles the following:

  • How the interest is calculated (day basis: 30/360, actual/ 360, etc).

  • If the capital repayment is linear or annuity type (same principal for every installment or increasing principal and decreasing interest resulting in a constant amount being due for every installment).

  • Fees you want to include in the repayment schedule.

  • If you allow for manual installment amount to be provided and overwrite automatically calculated one.

  • Frequency of the installment (monthly, every 30 days, etc).

When amounts are not available to cover notified amounts and there is a penalty interest defined for the product, the missed amounts are subject to automatic penalty calculation. Core Banking calculates and notifies the penalty interest daily. All the penalties applied by automated processes at the contract level are visible on the Payments tab, in the Penalties section, as described in the Viewing a Contract's Penalties topic. When the penalty interest is defined, there are specific Operation Items linked to it so that the system knows what types of amounts are subject to penalty: overdue principal, interest, commissions. Alternatively, the penalty interest can be applied to all missed payments. Penalty interest is defaulted from the product level and, if allowed, it can also be amended at contract level.

You can find all the existing transactions, payments, penalties, bank account operations, repayment schedules, schedule versions, repayment notifications for a contract on the Payments tab. The tab has no information to display for contracts in Draft status. Approve the contract to perform any transactions on the contract. Meaningful payment information is displayed here only after performing a disbursement.