Personal Unsecured Loan

An unsecured loan is a loan that doesn't require any type of collateral An asset or property that the borrower pledges to the lender as security for the repayment of a loan, giving the lender the right to take ownership of the pledged asset in the event of default.. Instead of relying on the borrower's assets as security, lenders approve unsecured loans based on the borrower's creditworthiness. Examples of unsecured loans include personal loans or student loans.

In the title field, enter a name for the product. Optionally, you can click the ellipsis button (...) to also provide a description and/or an availability period. Below, fill in the following product configurations.

Main Info

This section determines the amount, term, disbursement, codebtors Individual who assumes joint responsibility for repaying a loan alongside the primary borrower. If the primary borrower defaults on the loan, the codebtor becomes liable for the remaining debt., refinancing Taking out a new loan to replace an existing loan, usually to obtain more favorable loan terms, such as a lower interest rate, extended repayment period, or different monthly payment amounts., and restructuring Modifying the original terms and conditions of the loan to provide a more affordable repayment plan, typically when a borrower is facing financial difficulties or is struggling to meet their loan obligations. Can provide relief in the form of lower interest rates, extended repayment periods, deferred payments, changes in payment frequency, debt consolidation, waiving of penalties or fees, partial write-offs, etc. characteristics of the loan.

Parameter	Description
Loan amount and loan term	up to - Sets the maximum amount that can be loaned in the specified currency. from ... to - Sets a range for the amount that can be loaned in the specified currency. with a term of ... to - Sets a time range for the loan repayment in either months or years. E.g.: Loan amount from 1,000 to 10,000 Euro with a term of 1 to 5 years.
Disbursement	Is autodisbursed - Once the loan is approved, the loan amount is transferred to the borrower's bank account automatically. Is not autodisbursed - Once the loan is approved, the borrower must request the transfer of the loan amount.
Codebtors	Allows unlimited - There is no limit on the number of codebtors that can guarantee the repayment. Allows up to - There is a specified maximum number of codebtors allowed. Does not allow - No codebtors are allowed. E.g.: Allows up to 2 codebtors.
Refinancing	Allows - The loan can be refinanced. Does not allow - The loan cannot be refinanced.
Restructuring	Allows - The loan can be restructured. Does not allow - The loan cannot be restructured.

Interest

The interest sets up the amount of money (which is distinct from the principal repayments) that the borrower pays as a cost for borrowing money when repaying the loan. You can set up both regular and penalty interests Additional interest charged when a borrower fails to make timely payments on a loan (misses a payment deadline or makes a payment that is less than the agreed-upon amount)., with interest rates The interest rate is the amount a lender charges a borrower and is a percentage of the principal (i.e., the amount loaned). that are fixed, variable or based on a formula.

Parameter	Description
Interest	Click + Add interest to set up an interest for the loan based on the desired interest rate(s). fixed - Sets an interest rate that is a fixed percentage of the principal amount, regardless of changes in the market interest rates. variable - Sets an interest rate based on an underlying benchmark interest rate plus a specified percentage margin. based on formula - Allows you to set interest rates based on Product Formulas. for the first / for - Applies the interest rate for a specified number of installments Regular payment that a borrower is required to make to the lender to repay a loan over time.. until end - Applies the interest rate until the end of the loan term. E.g.: Interest is fixed at 5% for the first 6 installments and then variable indexed to EURIBOR 3M with a margin of 1% until end. NOTE   If you define multiple interests, the user will have the option to select one of them during the application.
Penalty	Click + Add penalty to set up a penalty interest for the loan. fixed - Sets an interest rate that is a fixed percentage of the principal, interest, or other reference value. based on formula - Allows you to set interest rates based on Product Formulas. E.g.: Penalty is 1.5% from Loan Interest. NOTE   If you define multiple penalty interests, all will be applied. For instance, if you set up a 1.5% penalty from interest and a 1% penalty from principal, the borrower will pay both when missing a payment.

Fees

To set up a fee Fees are charges and costs that customers have to pay for specific services and transactions, such as processing a loan application, ongoing support, early repayment, or account maintenance. Fees differ from the main costs of a loan or insurance (the loan's principal/interest or the insurance's premium) in that they typically cover operational expenses and are not related to the loaned/insured amount. for your product:

1. Click +Add fee.
2. Select a predefined type of fee from the list, or click Create new to define a new fee type (you can also rename an existing fee by clicking the fee name). The type of fee determines parameters such as the the conditions under which the fee is applied, how often the fee is charged, whether the fee is refundable or not, etc. For more information, see Fee Types.
3. Enter the amount of the fee:
   • value - a fixed value in the specified currency.
   • percentage - a specified percentage of either the remaining value, financed value, payed value, unused amount, used amount, overdraft limit amount, or amount.
   • based on formula - Allows you to set fees based on Product Formulas.

You can set up multiple fees that will be charged independently, based on their Fee Types. E.g.:

• Front-end fee is 25 $.
• Repayment fee is 4% over remaining value.

This will always charge the borrower a $25 fee on loan application. If, during the loan, the borrower decides to repay the loan in advance, a 4% fee is charged over the loan's remaining value.

Insurances

Insurances are required for borrowers that meet certain risk criteria, in order to cover the potential losses if they default on the loan.

To set up an insurance for your product:

1. Click +Add insurance.
2. Select the amount to insure:
   • value - A fixed amount in the specified currency.
   • percentage - A specified percentage of either the remaining value, financed value, payed value, unused amount, used amount, overdraft limit amount, or amount.
3. Select when the insurance should be issued based on the value of a specified Lexicon Term.

You can set up multiple insurances that will be issued independently, depending on whether they meet the issuance condition. E.g.:

• Insurance of 2,500 Euro when loan purpose is Auto Purchase, Home Refinance.
• Insurance of 50% over financed value when In BlackList is In BlackList.

This will issue a fixed value insurance for 2,500 Euro if the Loan Purpose, which is a value list lexicon term, is either an auto purchase or a home refinance.

If the applicant is marked as In BlackList, which is a boolean lexicon term, an insurance of 50% over the financed value must be issued.

Repayment

The Repayment section determines the periodicity and repayment schedule for the loan's installments Regular payment that a borrower is required to make to the lender to repay a loan over time., and how the repayments are impacted by holiday shifts Adjustment of installment due dates that coincide with public holidays by moving the due date to the last working day prior or first working day after the holiday. and grace periods A specified period of time during which a borrower is not required to make regular loan payments without incurring late fees or penalties. Typically granted immediately after the loan disbursement or before the start of the regular repayment schedule..

Parameter	Description
Repayment	Sets up the periodicity and schedule type of the repayment. performed on - Determines the frequency of installments based on Loan Periodicity. equal/decreasing - Determines if the installments are equal (by adjusting the principal to keep the sum between principal and interest constant on each installment) or decreasing (by repaying the same principal on every installment and having the interest decrease over time along with the outstanding principal). with schedule - Determines the repayment schedule, based on the Payment Schedule Type. E.g.: Repayment is performed on monthly in equal installments with schedule Equal Installment Monthly 365_TLU. NOTE   You can add multiple repayment schedules that the applicant can choose from by clicking +Add repayment repeatedly.
Holiday Shift	Determines what happens if an installment's due date overlaps a public holiday. forward - Change the due date to the next working day after the holiday. backward - Change the due date to the last working day before the holiday. defer due date - The payment amount is calculated based on the normal due date, even if the actual due date is shifted.
Grace Period	Determines what expenses are exempted during the grace period and how long the grace period is. interest - Borrower is exempt from repaying the interest. principal - Borrower is exempt from repaying the principal. both - Borrower is exempt from paying both the principal and the interest. installments - The number of installments that the grace period covers. E.g.: Grace period interest 2 installments.

Discounts

In the Discounts section, you can define discounts on any of the already configured interest items, commission items, or on all pricing elements.

There are three ways to create discounts:

1. Follow the sentence-based interface to configure a condition based on a dictionary attribute (e.g., Age >18), for which you define a discount. Note that you can also create new attributes, extending your dictionary (+Add discount > Create New).
2. Add a Dataset based on one, two, or more attributes for a pricing item. You can add more data sets, one for each pricing item. For more details on how to create Data Sets, see Product Data Sets.
3. Add a formula to define discounts with more advanced conditions based on mathematical expressions, data sets, and other inputs. You can add more formulas, one for each pricing item. For more details on how to create formulas in Product Designer, see Product Formulas.

Underwriting

The underwriting rules determine an applicant's eligibility for the product and whether or not a manual approval process is required (available only for underwriting rules based on Product Data Sets).

There are three ways to add Underwriting rules:

• Add Rule - Follow the sentence-based interface to configure a condition based on a Lexicon Term (e.g. Property Condition is Good or Excellent).
  HINT  
  In the attributes' pop-up window, you can click +New Attribute to quickly add a new lexicon term or Product Settings to edit the current lexicon term.
• Add Formula - Use Product Formulas that return a boolean result ("True" for approval and "False" for rejection);
• Add Data Set - Use Product Data Sets for the evaluation. This is mandatory if the rule can return an outcome where the application must go through a manual approval process. The data set can return only the Approved, Derrogation, or Rejected results (or an equivalent terminology defined in the Underwriting Data Set Values, e.g. Passed, Manual Analysis, or Not Passed).

  

For each rule, you can select the used in eligibility option to mark it as a knock-out rule, which automatically disqualifies the applicant if its condition is not met. Otherwise, the rule is submitted to the final approval review.

For the manual approval result, you need to configure the journey to direct the application to a back-office manual approval process. If you are using Multi-Dimensional Data Sets based on cascading data sets, the manual approval outcome must be defined in the top-level data set.

Documents

Specify the document types required from the applicants (and/or others involved in the origination process, e.g. codebtors Individual who assumes joint responsibility for repaying a loan alongside the primary borrower. If the primary borrower defaults on the loan, the codebtor becomes liable for the remaining debt.), as well as the document types provided to the applicants.

Parameter	Description
Required Documents	Documents that the applicant must provide in order to verify identity, income, product eligibility, etc. To add a required document: Click +Add document. Select the desired type of document. Choose if the document is mandatory for debtor and/or mandatory for co-debtor. E.g.: Income statement mandatory for debtor and mandatory for co-debtor.
Provided Documents	Documents that must be provided to the applicant typically in order to obtain an agreement and/or signature. To add a provided document: Click +Add document. Select the desired type of document. Choose if the document is: static: available for download during the journey in their original form, such as "General terms & conditions". This will prompt you to upload a document file. generated: based on templates with specific tokens (the document templates must be previously configured using the Digital Documents Processor). This will prompt you to select a digital document template. Choose if the document requires signature and/or requires accord. E.g.: Terms and conditions is static requires accord and requires signature.

Service

The Service section is used to define the configuration structure and characteristics of your banking product. The following options are available:

• Commission on unused amount: The number of months after which the system starts calculating commissions for any unused amount.
• Disbursement allowed: The number of months for disbursing funds to the borrower.
• Minimum principal for early repayment: Minimal principal allowed for early repayment.

Once you’ve configured all the fields, change the status from Draft to Approved to save your Personal Unsecured Loan product. For details on versions, see Product Approval and Versioning.

Below you can check a real-life example of how an Unsecured Personal Loan product is built in Product Designer.