Loan Products

The loan product serves as a template that defines the parameters, settings, and limits of loan accounts under the specific loan product. On Woodcore all loan accounts are required to be required to a loan product. Once, a loan product is defined, the settings of the loan product apply to all loan accounts with that product.

For example, a Student Loan product with features that allow monthly repayment and a maximum principal amount of N500,00. These parameters set in this product will apply to all loan accounts linked to this loan product, therefore the loan accounts will be created with a principal amount not exceeding N500,000.

Creating Loan Products

To create a Loan product:

• On the navigation pane, select Utilities > Products > Loan products.

• Click on the Create button at the top right of the screen

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Note

Fields marked with asterisks (*) are mandatory.

Details Actions

• Provide the required Details and currency information.

In this section you are required to:

Product Name

Enter a product name for the loan product. It is important that the Product Name should be easily identifiable or connected with the purpose of the Loan. This makes it easy for employees within your organization to identify the Loan product.

Currency

Woodcore supports a variety of currencies for loans. Select the desired loan currency. Note that the selected currency applies to all loan accounts linked to the loan product.

Description

Provide a detailed description of the product, this will enable other employees within your organization to understand the loan product and its purpose.

Installment in Multiples

This refers to the number of payments or “multiples” a loan is paid over time rather than in a single lump sum. For example, if you choose 10, this means the payment will be made in multiples of 10's till the amount is completely paid.

Start and Close date

Provide a start and close date for the loan product.

Note: Loan products cannot be used before and after the start and close date respectively.

Count Loan

Check the box to you want to record the number of loans taken by a customer within this product.

Terms Actions

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Additional Fields

If your loan product is based on the Loan cycle, jump to Section B.

Loan Product Fields

Section A: Define Loan terms for a normal loan product.

Principal

The principal amount is the total amount to be loaned out excluding interest and charges.

Minimum and Maximum are optional fields. The loan amount must be within this interval. Any loan above or below the minimum or maximum value will be invalid.

Example: Minimum: 5000, Default: 10000 & Maximum: 15000. At the loan, account-level default values will be shown.

Number of repayments

This refers to the total number of payments that a customer needs to make to repay the principal amount along with the interest accrued on it.. For example, where the number of repayment is set at a minimum of 5 and a maximum of 10. The borrower is expected to pay not more than the maximum number of repayments time for the loan to be completed.

Minimum and Maximum are optional fields wherein the number of repayments cannot be provided beyond the min & max value.

Interest Rate

• Nominal rate of Interest: This is the percentage increase in the amount to be paid.

Minimum and Maximum are optional fields wherein the rate of interest for loans cannot be provided beyond the min & max value.

Example: Minimum: 18, Default: 22 & Maximum: 24. At the loan, account-level default values will be shown.

The nominal rate can be applied per month, per year, or for the whole term of the loan. Select your desired rate.

Repayment

When creating a new loan product, you can control the extent to which loan schedules can be edited by selecting your desired Repayments Schedule options.

The repayment schedule includes:

• Repaid Every value for the repayment period.
• Select Day or Week or Bi-weekly or Month
• Repayment Starts After: This is used to set the minimum days between disbursal and the first repayment date.

Example: Where the loan disbursement is on the 1st of January, and the normal expected first repayment is on the 8th of January. If you provide 10 days as the minimum days between disbursal and the first repayment date, the first repayment will happen on 11th January.

Section B: Loan Cycle

A loan cycle tracks the number of times a customer has taken a loan. With the Terms vary based on loan cycle feature, you can define specific loan parameters for subsequent loans based on the borrower's payment history. For example, once a borrower has fully repaid their initial loan, you can set principal, number of repayments, and interest rates for any subsequent loans they may take out.

• Check the Terms vary based on loan cycle checkbox to enable the loan cycle.

• To add Principal options, click on the Add button. You can add more options until there are necessary rows for the options required.

Settings Action

Enter the required Settings details.

Amortization

Loan amortization calculates the repayment amounts for repayment of the loan over a specified period of time consisting of the principal amount and the interest. The amount paid periodically changes over time until the loan is fully paid off at the end of the loan period.

You can choose the loan amortization in:

• Equal installments : Here the loan amount is paid in equal payments however, repayments will vary in terms of interest, fees, penalties, and principal till the loan is completely paid.
• Equal principal payments: Here the loan amount is paid in equal payments however, payments will vary in terms of interest, fees, and penalties but remain equal in principal in repayments.

Interest Calculation Method

The interest method refers to the way in which interest is calculated and charged on the loan. These methods include:

• Flat: Also known as Fixed flat. Under this interest method, the interest is charged on the original principal amount of the loan only, and not on accumulated interest.
• Declining Balance: Under this method, the interest is charged on the remaining loan balance, which declines over time as payments are made. In other words, this method calculates interest based on the balance owed that is owed rather that the total amount. This method of interest calculation is also known as decreasing balance or reducing.

Moratorium

Select a Moratorium period on both principal and interest payments. Throughout this period, loan repayment is temporarily paused. You can choose within this period if principal, interest, or arrears should be temporarily paused.

• Here if Principal Payment is set to '4' and the Repayment Frequency of the client is monthly, the client is required to pay only the Interest for the first four months. After four months, the client will start paying both the Interest and the Principal amount until the loan is fully repaid.
• On Interest Payment: If '4' is set and the Repayment Frequency of the client is monthly, the client is required to pay only the Principal for the first four months. After four months, the client will start paying both the Interest and the Principal amount until the loan is fully repaid.

Note: Setting the Moratorium is optional.

Variable Installment

This allows for the flexibility of dates, amounts, and the number of installments. Check the box to enable variable installments.

In addition, there are other configurations (optional) such as Interest calculation, Guarantee Requirements, Loan Trance details and Configurable Terms and settings that can be added using the checkbox.

Charges Actions

• Enter the required Charges & Accounting details.

Charges

Loan charges added to a loan product will apply to all loan accounts added to the specific loan product.

The charges must already be defined or created. Select the defined charges from the drop-down.

Overdue Charges

Overdue charges are also added to the loan products. Similar to loan charges, overdue charges must already be defined in the charges section. The overdue charges are created by selecting Overdue charges in the Charge Time Type section.

Accounting

By default, the accounting will be disabled: None - Meaning if you are using this product for various transactions like disbursement, repayment, etc. These transactions will not be automatically passed in the journal entries.

Click on Next to preview the Loan Product. Ensure you go through the preview to verify the loan details.