This chapter describes how to create and update a loan.
This chapter covers the following topics:
Oracle Loans supports the entire loans management life cycle, from loan origination and approval, to servicing and eventual loan payoff.
Use Loans to:
Track a loan from initial application until approval and funding
Create approval conditions
Set up periodic loan billing for all active loans
Loans is seamlessly integrated with other applications within the Oracle E-Business Suite to facilitate all aspects of loan management.
For example, Loans automatically integrates with:
Oracle Trading Community Architecture
Borrowers, co-borrowers, and guarantors are stored in the TCA Registry. When you create a new loan for an new or existing borrower, Loans leverages functionality from the Customer Data Hub to prevent you from creating duplicate borrower records.
When you create a new borrower in Loans, it is automatically entered into the TCA Registry.
Tip: Schedule the DQM: Setup Data Synchronization program to run as frequently as every minute in order to be able to search for new borrowers.
See: Oracle Trading Community Architecture Administration Guide for more information.
Oracle General Ledger
See: Integrating General Ledger Using Journal Import, Oracle General Ledger User's Guide
Oracle Receivables
When creating a loan application, you can select an existing receivable to create an ERS loan.
See: Creating a Loan.
Additionally, billing documents (such as invoices and debit memos) are created in Receivables when you initiate the billing process for loans. These billing documents provide payment amounts for principal, interest, and fees. When payment is remitted, your Receivables clerk applies receipts to these documents. Your receivables clerk also transfers journal entries for billing and payments the general ledger.
See: Overview of Loan Billing.
Oracle Payables
Loans integrates with Oracle Payables to disburse funds for approved direct loans. Suppliers are created in the Loan Origination process. Payables invoices are created upon loan approval. Then Payables clerks validate the invoices and process the payments by check, wire or other Payables methods, to disburse funds to a third party agency or directly to the borrower.
See: Oracle Payables User Guide.
Oracle Advanced Collections
Loans uses Advanced Collections scoring engines to identify when loan payments are overdue and set the status of the loan to Delinquent or In Default, depending upon the severity of the overdue condition. From there, Advanced Collections takes over and provides automated dunning or collections strategies to schedule calls and other collection activities for the collections agents. Advanced Collections processes payments and promises to cure the troubled loans.
See: Overview of Scoring, Oracle Advanced Collections Implementation Guide and Collections Strategies, Oracle Advanced Collections Implementation Guide.
Oracle Credit Management
Loans displays information from Oracle Credit Management in the Borrower Summary. This information can be used in the loan application and approval process.
See: Oracle Credit Management User Guide for more information.
Oracle Common Application Calendar
Use Oracle Notes to track comments and customer interactions, during both loan origination and servicing phases.
Use Oracle Attachments functionality to add attachments such as scanned documents or URLs to notes or loan approval conditions.
See: Overview of Oracle Notes, Oracle Common Application Calendar User Guide.
Oracle XML Publisher
Loans uses XML Publisher to generate statements and reports for Loans. These can be printed in multiple formats and made available to download or forward.
Statements are used to inform the borrower about their next bill.
The Loans Portfolio Report provides a listing of all loans along with critical loan summary information.
The Loans Reconciliation Report assists lending organizations to review billing and payment discrepancies.
The Loan Agreement Report provides a printable document of all loan details.
See: Oracle XML Publisher Administration and Developer's Guide.
The Loans dashboard is your virtual "home" within the Oracle Loans application.
Use the dashboard to:
Search for a specific loan.
Execute a search using different loan attributes - Borrower Name, Loan Description, Loan Number, Loan Status or Taxpayer ID; or execute an advanced search.
Review and respond to notifications related to your loans.
See: Notifications.
View your recent loan activities.
You can select Show to display additional loan details. You can filter the loans shown in the Dashboard to show only loans with the same status, such as loans in origination or loans in funding. Additionally, you can sort the list by clicking these column headings:
Loan Number
Requested Amount
Loan Amount
Currency
Status
Start Date
Operating Unit
You can personalize the group of loans displayed on the dashboard to match criteria you select. You can change the number of loans displayed and specify parameters to filter the loans displayed. For example, you could personalize your view of loans to show only active loans over a certain amount.
View a borrower summary for a specific borrower.
See: Viewing Borrowers.
Create a new loan application.
See: Creating a Loan.
Update an existing loan application.
See: Updating a Loan.
Delete an incomplete loan application.
View graphs showing loans grouped by status and value.
Submit and view concurrent requests and reports.
Navigate easily to main tasks areas through container links and tabs.
For additional information, see: Using Oracle Loans.
Use Oracle Loans to create and track loan applications, from origination to payoff.
You can create an application for a borrower.
You can create an application for one or more existing receivables in the same currency in Oracle Receivables.
Note: Set the class for the loan to Direct Loan or Extended Repayment Schedule to determine which create flow to use, based on your organization's business process.
Creating a loan involves two processes:
Creating the loan application.
Adding details to the application. See: Updating a Loan.
To create a direct loan application for a borrower
From the Loans dashboard, click Create Loan.
Enter the general loan information.
Select a Loan Product with Direct Loan Class.
The loan product selected for a loan sets the Type, Operating Unit and Loan Currency to be used with the loan product. The Loan Type and Class determine the accounting distributions recorded when the loan is created, funding is approved, and loan payments are billed.
For further information, see: Setting up Loan Types and Setting up Loan Products.
Select a Legal Entity, Application Date, Loan Purpose and assign a Loan Officer.
Note: The Application Date defaults to the current date. You may change it if you wish to display a date before or after the current date.
Enter the borrower information by searching for an existing borrower. If the borrower does not exist, you can:
Create an organization
Create an account number
Create an address to be used as the primary billing address.
Tip: To search for an address for an existing borrower, the customer must have a Bill To address set up in Oracle Receivables.
Primary Contact
Enter loan details, such as:
Requested Amount
Note: The Requested Amount defaults to the minimum requested amount set in the loan product.
Term Start Date
Term
Note: The Term defaults to the minimum term set in the loan product.
Balloon Payment Type
Note: When creating a loan with a term type balloon payment, enter a balloon term that is longer than or equal to the loan term.
Note: When creating a loan with an amount type balloon payment, enter a balloon amount greater than the requested loan amount.
Subtype
Note: Subtype indicates whether the loan is secured by collateral. If you select Secured, enter the loan-to-value ratio required for the loan in Collateral Percentage.
Enter the rates.
Select an index type, payment frequency, interest rate index and effective date. Loans defaults the index rate percentage based on the index rates you set up in Loan Administration. You can override the defaulted index rate if necessary. See Setting Up Interest Rates.
The interest rate for the loan is the total of the index rate percentage and the spread percentage, if any. If the loan has multiple interest rates, the interest rate percentage is the initial interest rate for the loan.
Select the payment frequency for the loan.
Note: When you first create a loan application, the term type is fixed. To create a variable rate loan, update the interest rate on the Origination tab after you save the application. See Updating a Loan.
Click Save and Add Details. Loans creates the application and navigates to the Origination tab, where you can update the application. See: Updating a Loan.
Or, click Apply. Loans creates the application and navigates back to the dashboard.
Note: When you create an application, the loan status defaults to Incomplete.
To create a loan application from an existing receivable
From the Loans dashboard, click Create Loan.
Enter the general loan information.
Select a Loan Product with ERS Loan Class.
The loan product selected for a loan sets the Type, Operating Unit and Loan Currency to be used with the loan product. The Loan Type and Class determine the accounting distributions recorded when the loan is created, funding is approved, and loan payments are billed.
Select a Legal Entity, Application Date, Loan Purpose and assign a Loan Officer.
Note: The Application Date defaults to the current date. You may change it if you wish to display a date before or after the current date.
Select a borrower for the loan and then add one or more outstanding receivables. The outstanding receivables must be in the same currency as the loan.
Enter the amount of each receivable that will be used to create the loan. The amount cannot exceed the current receivable amount.
Click Derive to pull in all transactions that match the rule setup based on the selected loan product and customer in the loan creation page. The balance amounts on the transactions will be used to create the payment plan.
Note: When you create a loan for an existing receivable, Loans will automatically adjust the original receivable with the amount of the loan. See: Approving a Loan.
Add the borrower details.
Enter loan details and terms, such as:
Transaction type
Select a transaction type for billing.
Term Start Date
Term
Balloon Payment Type
Note: When creating a loan with a term type balloon payment, enter a balloon term that is longer than the number entered for term of the loan.
Note: When creating a loan with a amount type balloon payment, enter a balloon amount greater than the amount entered in the Requested Amount field .
Subtype
Subtype for a loan to indicate whether the loan is secured by collateral
Enter the rates.
Select an interest rate index and effective date. Loans defaults the index rate percentage based on the index rates you set up in Loan Administration. See: Setting Up Interest Rates.
The interest rate for the loan is the total of the index rate percentage and the spread percentage, if any. If the loan has multiple interest rates, the interest rate percentage is the initial interest rate for the loan.
Select the payment frequency for the loan.
Note: When you first create a loan application, the term type is fixed. To create a variable rate loan, update the interest rate on the Origination tab after you save the application. See: Updating a Loan.
Click Save and Add Details. Loans creates the application and navigates to the Origination tab, where you can update the application. See: Updating a Loan. Loans automatically adjusts the original receivable when the completed loan application is approved. See: Approving a Loan.
Or, click Apply. Loans creates the application and navigates back to the dashboard.
Note: When you create an application, the loan status defaults to Incomplete.
From the Loans dashboard, click a Loan Number to update a loan.
When you first create a loan application, the status is always Incomplete. After a loan is approved, the status is Active.
If the status is Incomplete and you click the Loam Number from the dashboard to update the loan, then Loans navigates to the Origination tab. Use the Origination tab to enter all required information before you can approve the application.
Note: If the loan status is Active, Delinquent, Default, or Paid-off, then clicking Update takes you to the Servicing Center. See: Servicing Center.
If the loan status is In Funding, then clicking the Loan Number takes you Funding. See: Funding.
To access information about the borrower for the loan, click the borrower name hypertext link. See: Viewing Borrowers.
To complete a loan application, use the Overview area on the Origination tab. See: Overview.
Use the other areas on the Origination tab to enter additional information about a loan:
Borrowers
See: Viewing Borrowers.
Collateral
See: Adding Collateral.
Disbursement
See: Disbursing a Loan
See: Adding a Payee.
Approval
See: Approving a Loan.
Accounting
See: Viewing Loan Accounting.
Finally, when the application is completed and ready for approval, use the Approval area. See: Approving a Loan.
Note: Throughout the Origination tab, you can click Save or Apply:
Click Save to save loan updates and remain on the Origination tab.
Click Apply to save loan updates and return to the dashboard.
The Overview area includes the following sections:
Use this section to update basic loan details.
When you create an application, Loans automatically populates this section with all required values. Note that before you submit the application for approval, you can update any defaulted values.
The General section includes the Loan Status History region, which documents all status changes for this loan.
Transaction Type - When creating a loan from an existing receivable, Loans uses this transaction type when billing loan amounts. The default is the transaction type set up in System Options.
If you are not converting an existing receivable to a loan, then Loans uses the transaction type from the system option setup for billing purposes. See: Setting Up System Options and Overview of Loan Billing.
Term Start Date - Date when you want the loan to start. Default is the current date but you can change it.
Context Value - Loans displays this field only if your system in configured for descriptive flexfields.
Class, Type, and Subtype - Loan classifications. These classifications are automatically seeded. Your implementation team can add additional loan types. See: Defining Oracle Loans Lookups.
Use this section to update details regarding this loan's:
Interest rates and interest rate schedule
With fixed rate loans, the rates are known when the loan is created.
If you select Fixed, then this loan can have either a single interest rate or multiple rates for the loan duration.
With variable rate loans, the rates are unknown at the time of loan creation, and are based on future indexes, instead.
If you select Variable, then you must indicate the initial interest rate, as well as placeholder rates for subsequent rates.
Note: For a loan, you can have one interest rate schedule for all payments using the initial interest rate or you can define additional periods and enter suggested rates in order to complete the Amortization Schedule for the loan. Remember that the suggested interest rates are not binding and change when future interest rates are in effect.
Use the Interest Only check box to indicate that Loans will bill only interest for the selected installments. A loan can be entirely interest only installments or a combination of interest only and standard installments throughout the life of the loan.
Ceiling Rate Percentage specifies the maximum interest rate on the loan.
Lock Date is to specify the date on which the specified interest rate is agreed upon (lock-in rate).
Lock Expiration Date specifies the date on which the lock-in rate expires if the loan has not been processed by then.
Amortization Method
Use these options to calculate how Loans will handle repayment of the loan. You can choose from:
Equal Payment: The loan is repaid in equal installments for the given frequency. All payments are equal except the first and last, which may be different to balance out the repayment.
Separate Schedules: The principal and interest of the loan is repaid over different frequency types. For example, the principal may be repaid annually, while the interest is paid monthly. The repayment date for principal and interest can also be different. If you selected this method, you will see Principal Payment Start Date, Interest Payment Start Date, Principal Payment Frequency and Interest Payment Frequency fields.
Equal Principal Repayment: The principal and interest are repaid over the same frequency type but the principal amount is equal across the installments and only the interest varies across the months. The total amount payable each month is a sum of the principal and interest. Since the interest amount is variable, the consolidated monthly payment varies across the repayment tenure.
Interest calculation method
Use these options to specify how Loans will calculate interest for this loan. There are two available Interest Calculation Methods:
Simple Interest: If you selected Simple the interest due on your loan is calculated on simple interest basis.
Compound Interest: If you selected Compound, the interest is calculated on compounding basis.
Note: You can only select one of the two interest calculation methods, i.e. Simple or Compound. The interest due on your loan cannot be calculated using both methods, unless the loan is restructured or modified.
You can change the payment start date to any date within the term of the loan. If the new start date is more than one month after the loan start date, the number of payments for the loan and the amortization schedule will be recalculated for the loan. The loan maturity date will not change.
Compounding Frequency
The compounding of interest is based on the frequency set in the Compounding Frequency LOV. The available values are: Week;y, Monthyl, Bi-Monthly, Quarterly, Semi-Annually and Annually.
Terms for Payment
Use these options to indicate how you want to apply payments. You can:
Decide if you want to reamortize the amortization schedule, if a borrower makes an overpayment. See: Amortization.
Specify the past due amount at which the loan becomes delinquent. Loans displays the first payment amount as initially calculated by the Amortization Schedule as a default. If you change the interest rate or term for this loan at a later time, you may want to also update this amount. Loans and Advanced Collections use this amount when determining if loan payments are overdue and to change the status to Delinquent or In Default. See: Updating Loan Status.
Specify the order in which you want to apply payments: Fees, Interest, and Principal. You can list a payment application type only once in the order.
Note: If your organization charges fees, then you must include Fees in Terms of Payment in order for the billing engine to create the appropriate transaction. You should define the order for all transactions types.
Interest Only - Select this check box if this an interest-only loan.
Days Formula - Determines the number of days in a period when calculating interest. This value defaults from the Day Count Method system option. See: Setting Up System Options.
Payment Start Date - Loans defaults the payment start date based on the loan start date and payment frequency that you specify for a loan. You can change this date to any date within the term of the loan.
Reamortize Overpayments - Select this check box if you want to recalculate the amortization schedule when borrower remits overpayments.
Delinquency Condition: Amount Past Due - Loans defaults the monthly payment amount from the initial Amortization Schedule as the amount over which the loan is considered past due. You can change the amount. This field does not update automatically if the monthly payment amount for the loan changes. You must manually adjust the Past Due Amount.
You can add applicable fees to this loan.
To add a fee, click Add Fee, then select a fee and add required details.
You can add the following types of fees:
Memo - Fee is added to an ERS loans for information only. A memo fee is not included as part of a loan.
See: Memo Fees.
Event Based - Fee is billed automatically based on a seeded trigger event and user defined rules. For example, an origination fee is billed when a loan is approved or a late fee is billed when payment is not received on time.
See: Event Based Fees.
Manual - Fee is added manually to an active loan in Servicing.
See: Manual Fees.
Recurring - Fee is billed automatically over a range of installments.
See: Recurring Fees.
Note: You must create fees before you can add them to a loan application. See: Defining Loan Fees.
Some fees are not billed and do not have any accounting impact in the general ledger through Loans. To view these fees in Loans, you can add a memo fee to a loan.
For example, an outstanding receivable that you create a loan for might have already accrued interest. You can add a memo only fee for the preaccrued interest, and indicate how you want the fee to be represented in the repayment (amortization) schedule that you provide to the borrower:
If you amortize the fee, then Loans lists the fee within the amortization schedule, in the Memo Items column, alongside the loan payments and includes the amounts in the Payment column on the Amortization Schedule.
If you expect payment of the fee before the first loan payment, then Loans lists the fee separately from the amortization schedule.
Loans schedules the fee for repayment prior to the loan start date, using the number of installments that you specified when you added the fee.
Note: If you set a memo fee to be due before the first loan payment, then the amortization schedule does not include this fee. Instead, Loans presents this fee in the Memo Fees Due Before First Loan Payment region of the Amortization area.
With memo fees:
You can add only one memo fee to a loan application.
On the amortization schedule, Loans separates origination fees from memo fees.
If you amortize the memo fee, then you must select the number of installments that you want the memo fees to be paid along with.
You can add an event based fee to a loan if you want Loans to automatically bill the fee when a loan event occurs. The events that can trigger billing a fee are:
Origination: Billed when loan is approved and status changes to active. You can set up origination fees to be billed at loan origination (installment 0) for ERS loans and at disbursement level for direct loans.
Late charge: Billed when loan payment is overdue. Loans calculates the fee for the last payment due and bills the fee the next time you run the Billing program. You can determine the number of grace days allowed before a payment is considered overdue.
Run the LNS: Fee Assessment concurrent program daily to identify and calculate the late charges to be billed. Then the next time you run the billing program, it will bill the late charges. You can also run the LNS: Loan Maintenance and Billing request set from Forms that includes the Fee Assessment and Billing programs.
For event based fees, Loans cannot display the fee amount in the list of fees assigned to a loan until the event trigger has occurred and the fee is billed. For example, you can view the amount of a late fee only after payment is not received on time for a loan and Loans bills the fee.
Add a fee manually to a loan in Servicing. A manual fee is billed with the next payment number for a loan. For example, you can add a fee for insufficient funds charge.
To bill a manual fee, you must first add the fee to a loan in Origination. You can add a fee before or after the loan is active. Then, when you need to bill the fee, such as charging the borrower for insufficient funds, add the manual fee in the Fee Details area of Current Amortization. You can view billed manual fees in the payment detail for a specific payment.
Add a recurring fee to a loan to bill a charge over a number of loan installments. Recurring fees are billed at the same time as the monthly installment. You can view the fee amount in the amortization schedule and in the payment detail for a specific payment.
You can view all fees assigned to a loan in Origination. You can view billed fees in the Amortization Schedule and in Payment Detail for a specific loan payment in Servicing.
Based on setup parameters, you can edit fee amounts or billing options after fees have been added to loans.
When you assign a fee to a loan, you can update the accounting flexfield for the fee's credit account. These changes affect the accounting information for this loan only.
You must enter a credit in Receivables if you need to change a fee that has been billed with a loan. You can view credits in Payment History.
Run the Fee Assessment program daily to identify event based fees
You can add conditions that the loan must meet. For example, you can add conditions that an application must satisfy before a loan can be approved.
To add a condition, click Add Conditions, then enter the required condition details. You can add multiple conditions at once.
Note: If a loan is set up to be converted to a permanent loan, you can add conversion conditions to it. All such conditions must be met by the borrower before the loan can be converted.
You can update a condition before a loan is approved by selecting a different condition type or name.
Note: You must create conditions before you can add them to a loan application. See: Defining Loan Conditions.
Oracle Loans uses the information that you provided elsewhere in the application to automatically calculate the amortization schedule for this loan.
You can:
Customize the schedule's individual installments: You can alter the date of repayments, amount of repayment, application of repayment towards principal and interest and control, how much is applied toward each. You can also waive or reduce interest amounts as well as regulate the principal amount repaid.
You can shift between customized amortization schedule and regular amortization method anytime before loan. approval. However, the changes made by the user in the custom schedule would be lost each time, a switch is made.
Note: Once you customize an amortization schedule, Loans cannot update it. For example, if the loan Start Date changes for a loan with a custom amortization schedule, you will have to manually update the schedule.
Download the schedule as a spreadsheet
Upload a spreadsheet to Loans
Upload content as a .csv file, or as a delimited text file. Use the same column headings that appear in the amortization schedule: Payment Number, Date, Principal, and Interest. Format dates as 31-Nov-2006.
Note: To ensure a successful upload, you should download the schedule first, make your updates, and then use that same schedule for uploading.
After the loan is approved, you cannot update the original amortization schedule for a loan shown on the Origination tab. You can view the current amortization schedule from the Servicing tab.
See: Viewing Current Amortization Schedule.
For a description of memo only fees, see: Fees.
Follow these guidelines when customizing the amortization schedule. Click Save to refresh the data shown on the schedule.
You cannot change the payment amount, which reflects the total amount to be paid against a particular installment. To change the payment amount, you must either change the principal or interest or both.
The total of all principal lines entered must equal the loan amount.
You can edit the Principal column or Freeze principal repayment for an installment. To do this, you can choose from any of the 6 list of values available under Choose an Action: 1) Freeze All Interests 2) Freeze All Principals 3) Freeze All Principals and Interests 4) Unfreeze All Principals, 5) Unfreeze All Interests and 6) Unfreeze All Principals and Interests.
You can waive interest or reduce the amount of interest payable but cannot waive part or full amount of principal outstanding.
The total amount repaid over each installment can be changed.
Payment numbers must be consecutive.
Payment dates can be changed and they need not follow any fixed order. Shift Subsequent Due Dates can be used to automatically change all subsequent dates from the modified date. The date must be any date greater or equal to the loan start date for INCOMPLETE loans and/or greater then due date of the last billed installment for ACTIVE loans. The date cannot be greater than the maturity date for the loan. You cannot have two rows with the same date. If you modify dates with the Shift Subsequent Dates checked, the schedule will be automatically recalculated.
If you Freeze interest repayment for installments. However, freezing interest can result in losses and the system doesn't automatically monitor loss or gain from such action.
Note: You cannot Freeze the last row of the amortization schedule as it is used to balance the repayment schedule.
You can Select or Remove an installment from the amortization schedule.
The following repayment methods are supported within customized schedules: 1) Equal payment or 2) Equal Principal or 3) Balloon payment. The repayment method selected will determine the recalculation.
If you selected the Equal Payment method, the amount of principal and interest break up over the unfrozen rows is computed based on the Equal Payment approach. The payment amount remains equal, while the break up of the principal and interest amounts vary for each unfrozen row.
In Equal Principal method, the amount of principal is equally spread over the unfrozen rows. The payment amount is derived based on the interest for each row and the payment amount is likely to vary between different unfrozen rows.
In the Balloon method, the schedule follows the same values for the unfrozen rows, as per the original schedule. Any difference is adjusted in the last row’s principal amount.
The number of rows in a schedule must equal the number of installments for the loan.
Principal and interest amounts must be 0 or greater.
Fees are always calculated and cannot be edited when you customize the amortization schedule.
Once you customize the amortization schedule for a loan, you must manually maintain any changes. For example, if the loan start date changes for a loan with a custom Amortization Schedule, you must manually change the dates in the schedule. For active loans, you can only update the amortization schedule for unbilled loan installments.
If possible, avoid creating a manual bill for a loan with a custom Amortization Schedule. If you create a manual bill, you must actively manage the remaining principal balance of the loan.
If the balance of a loan is less than the remaining principal to be billed shown on the customized Amortization Schedule, then the scheduled billing will not occur. Create a manual bill for the remaining principal, interest, and fees, if any.
You cannot calculate and process a loan payoff if a loan has a custom schedule. Instead, you must manually calculate the loan payoff amount and update the next unbilled installment in the Amortization Schedule with the payoff amounts.
Using Oracle Notes, you can add comments to loan information, such as your notes about customer interactions, about why you approved or rejected the application, or why you modified a fee amount.
Note: See: Overview of Oracle Notes, Oracle Common Application Calendar User Guide
Use this section to obtain an overall sense of the borrower, co-borrower, and guarantor's financial exposure from a loan perspective.
This section displays any existing loans that are related to the current loan, via:
the primary borrower
the co-borrower
the guarantor
You can access Borrowers to view all information about the borrowers for a loan including the primary borrower, co-borrowers, and guarantors:
Borrower Details
Select a borrower from the Borrowers table to view the detail information.
Borrower Summary
To access Borrower Summary, click the borrower name hypertext link in the loan header. You can link to Borrower Summary from the Dashboard, Origination, and Servicing.
Note: Borrower Summary page always displays all amounts in Ledger Currency.
Assets for the borrower. To add an asset, see: Creating Assets.
Credit Summary: View credit information generated by Oracle Credit Management, if installed.
See: Viewing the Credit Summary, Oracle Credit Management User Guide.
You can perform these tasks related to borrowers:
Add co-borrowers and guarantors to the loan. See: Adding Borrowers and Guarantors.
Update borrower information. Click the borrower name hyperlink in the list of borrowers associated with this loan.
Create a new borrower to add to the loan. See: Creating a New Organization.
Create a new organization to add a new borrower, co-borrower, or guarantor to the Oracle Trading Community Architecture Registry. The new organization appears on the Borrowers page and you can select the role of co-borrower or guarantor.
Related Topics
Adding Borrowers and Guarantors
You can optionally add co-borrowers and guarantors to this loan.
This table describes the difference between co-borrowers and guarantors:
Type | Description |
---|---|
Co-borrower | Although bills are sent to the primary borrower on this loan, co-borrowers are equally responsible for loan payments, should the primary borrower default on the loan. |
Guarantor | The Guarantor may be contacted if the primary borrower and any co-borrowers stop making payments and cannot be located. |
To add a co-borrower or guarantor, click Add Another Row on the Borrowers page and search for the organization in the TCA Registry.
After finding the organization, you can update the existing organization with new details.
To create a new borrower, co-borrower or guarantor, click Create Organization.
You can change the contact for the primary borrower from the Borrowers page.
You can create assets for borrowers, co-borrowers, and guarantors. Assets are then added as collateral for a loan and reviewed during the loan approval process. See: Adding Collateral.
If the purpose of the loan is to acquire an asset, the new asset must also be created as part of the borrower's information. For example, if a borrower is applying for a loan to purchase a piece of commercial property, then create an asset for the property and enter the associated loan number in the Acquired For field.
The following table show the classes and types that Loans provides to group assets.
Class | Types |
---|---|
Machinery and Equipment | Commercial, Personal, Others |
Real Estate | Land, Property, Personal, Others |
Securities | Bonds, Personal, Stocks, Others |
Others | Agricultural, Cash, Others, Personal |
You can define additional values for class, type, quantity, reference fields as needed for your business process. If you define a new class, you must also define the quantity and reference lookup values for the class.
You can enter a custodian or lien holder information for the asset by searching for a party or creating a new organization.
You can update asset information throughout the life of the loan.
Note: When you make updates to existing assets, changes are reflected in the History section. The Pledged Amount section reflects all pledged amounts.
Class: Main asset categories
Type: Subgroup of Class
Reference: Enter identifying information for the asset, such as VIN number for a vehicle or ticket symbol for a security.
Acquired for: Enter the loan number if the purpose of the loan is to acquire this asset.
End Date: The date the asset was sold. If the purpose of a loan application is to acquire an asset and the application is rejected, Loans automatically enters the rejection date to end date the asset.
Next Valuation Date: The date for the next appraisal or revaluation of the asset.
Context Value: Use this descriptive flexfield to enter user-defined parameters to group assets for reporting purposes. See Step 5 in Oracle System Administrator Setup.
You can add collateral for a loan. Collateral is required if the loan subtype is Secured.
Collateral consists of a list of assets belonging to the borrower, co-borrowers, and guarantors that support the loan. A lender can seize the collateral if the borrower defaults on the loan.
You must add an asset to a borrower's information before you can add it as collateral for a loan. See: Creating Assets.
When you search for assets to add as collateral, only assets in the same currency as the loan currency are available.
You can pledge some or all of an asset's value for a loan.
To remove an asset from an active loan, you must first pledge additional assets to fulfill the loan to value ratio before you can remove the asset.
When a loan is deleted or rejected, the acquired asset or pledged amount towards collateral will be removed.
Amount Pledged: Amount of asset pledged as collateral for a loan.
Amount Available: The difference between the asset's worth and the total amount pledged on this or other loans.
Loan to Value Ratio: The ratio of the value of the assets to the total loan amount. For secured loans, the borrower must pledge assets as collateral that equal this value. Enter this percentage when you create a loan application.
When you submit a loan for approval, Loans validates that the loan to value ratio is met.
Current Loan to Value Ratio: Pledged collateral as percentage of the loan amount.
Remaining Collateral Needed: Remaining amount of collateral that must be pledged to meet the loan to value ratio for a loan.
Total Collateral Amount: Total amount of all collateral pledged for the loan.
While the loan type defines if a loan has single or multiple disbursements, the loan product specifies the number of disbursements for a multiple disbursement loan. The loan type also indicates whether a multiple disbursement loan can be converted to a permanent loan after the final disbursement.
Create a disbursement schedule for loans disbursed in multiple payments. To create a disbursement schedule:
Click the Loan Number and navigate to the Disbursement tab.
The disbursement schedule is populated with activity name(s) defaults from the Loan Product. You can add additional payments or modify information in existing rows.
Specify a target date of disbursement of the part payment and the loan percent to be disbursed.
Add Payees if the repayment is made by a party other than the borrower. For more information, see: Adding a Payee.
Note: The borrower is the default payee.
You can associate optional or mandatory conditions to each disbursement activity.
Note: These conditions are in addition to those that may have defaulted from the Loan Product. If these conditions are marked mandatory you cannot override them. If they are updateable, you can modify or delete them.
Optionally, associate fees to be paid with each disbursement.
Note: These fees are in addition to those that may have defaulted from the Loan Product. If these fees are marked mandatory you cannot override them. If they are updateable you can modify or delete them.
Add payee information to disburse the funds for a direct loan when it is approved. A payee can be the borrower or a third party such as an escrow company. Oracle Loans integrates with Oracle Payments to disburse funds.
To add a payee, you can select from the list of existing suppliers in Payments or create a new payee. All new payees are automatically entered into Payments.
Tip: For frequently used payees, such as escrow companies, set up payees as suppliers in Payments with a supplier type of Third Party Closing Company or other supplier type that you define.
No changes can be made to payee information after submitting the loan funding advice. However, in multiple disbursement loans, you can make changes to the Bank and Payment method for each payee before the fund disbursement.
Payment Method: Payment can be made in any payment method supported by Payments, such as check, electronic funds transfer, and wire.
Oracle Loans integrates with Oracle Credit Management to perform credit reviews for loan application requests and decide to approve or reject it. The Credit Review option is set at the Loan Type level. You can either create a loan with a loan product that requires credit review or request review while creating or updating a loan. You must complete as much of the application including recording assets, financial data, co-borrowers, guarantors and other loan details to request credit review.
Once set for review and saved, you cannot remove the credit review requirement. After selecting the Credit Review option, the Financial Data subtab on the Borrower tab appears and you can view, create, update or copy financial data that may exist in another Credit Management case folder or loan application of the current borrower. You can also run a multi-statement comparison by clicking Compare. The credit request is submitted from the Approval tab. You must setup checklists with all possible combinations of Credit Review Type and Credit Classification in Credit Management before submitting a Credit Review request. Separate credit requests are created in Credit Management for Primary Borrower and co-borrowers using the Credit Review Type defined on the loan product. Guarantor credit requests are created with a reference to the primary borrower's credit request as the parent.
Once you submit a loan for Credit Review, it is frozen and cannot be updated. After credit review is completed, the status of the loan application changes to Incomplete: Credit Reviewed and you can view the credit review details. You can continue to update the loan and the loan status will change to Incomplete: Pending Credit Review. You'll need to resubmit it for Credit Review which will create new credit requests with reference to parent requests.
Note: If the loan type for a loan requires a credit review, you can submit the loan application for approval only after the credit review process is complete.
Completing Loan Application after Credit Review
If the loan is credit approved and the recommended amount matches the loan request, then you can submit it for approval to the loan manager.
If the loan is credit rejected, then discuss the case with your loan manager and resolve if you should override credit team recommendation and seek approval to fund the loan.
If the loan is conditionally approved and lists additional conditions to be met by borrower before credit team's approval, then you must ensure the conditions are met before submitting for approval to loans manager.
For further information, see: Oracle Loans Integration, Oracle Credit Management User Guide
On the Approval tab, review any mandatory conditions that must be met before you can submit the application for approval.
For each condition, you can also add attachments so that, when a loan manager completes the application review process, any required documents are available online for easy access.
In loans with multiple disbursements, the disbursement schedule must be verified before submitting the application for approval. The disbursements must equal 100 per cent.
Use the Funding Option check box to automatically disburse funds when loan is approved. Otherwise, Loans uses the prioritized funding process.
Select the Completed boxes to indicate that mandatory conditions are met. Then, click Submit for Approval.
In loans with Credit Review set to Yes, ensure all the required conditions are met and Fulfillment date is filled. Click Submit for Credit Review.
The loan status changes to Pending Approval, and the application requires a loan manager's review. The manager can approve or reject the application, or ask for additional information:
If the loan manager requests additional information, then the status remains Incomplete.
If the manager approves the loan, then the status changes based on type of loan.
Direct loans with automatic funds disbursement - status changes to In Funding
Direct loans with prioritized funds disbursement - status changes to Approved.
ERS loans - status changes to Active
Note: You can Cancel Disbursements only for Approved loans. Incomplete loans or loans pending approval can be rejected and hence the Cancel Disbursements button is unavailable.
If the loan manager rejects the loan, then the status changes to Rejected, and you can no longer update the application.
The borrower must complete a new application for loan consideration.
Note: Any notes that you add from the Approval tab are visible from the Notes tab in Overview or Servicing. See: Notes.
The Accounting area lists the GL accounts that are used for:
Loan Approval
When a loan is submitted for approval or approved, Loans uses the GL accounts entered here.
Loan Funding
When a loan is approved and funded, Loans uses the GL accounts entered here
Billing
Each time you bill the borrower for this loan, Oracle Receivables uses the GL accounts entered here for the loan principal and interest.
Loans uses default rules to establish the accounting for a loan. For a description of these rules, see: Setting Up Accounting.
After loan approval you can view the accounting events history and verify journal entries using the view Accounting Events link on the Accounting tab. You can also run Online Accounting programs like:
Create Draft Accounting
Create Final Accounting
Creates accounting entries but does not post to Oracle General Ledger.
Create Final Accounting and Post to GL
Creates accounting entries and posts to Oracle General Ledger.
Funds Check
Checks if funds are available before submitting the loan for approval.
Funds Reserve
Checks if funds are available and reserves funds for loan.
View Funds
Displays report with fund amount, reserved amount and balance in fund.
Note: To view accounting for Loan Payable, Loan Liability in Accounts Payable, you must run Create Accounting program in Accounts Payable.
Note: To view accounting for Billing, you must bill loan apply receipts, run Create Accounting program in Accounts Receivable.
Use notifications to automatically inform loan agents and managers about critical events that occur during the life of a loan. When the status of a loan changes, a business event is raised in Oracle Workflow, which then sends a notification to the recipient based on user roles.
Each notification event is associated with a loan class and type. Loans seeds and enables notifications for the combinations of loan class and type shown in the following table.
Loan Class | Loan Type |
---|---|
Extended Repayment Schedule | Extended Repayment Schedule |
Direct Loan | Agriculture |
Direct Loan | Business |
Direct Loan | Real Estate |
Note: If you add loan types, you must enable the workflow and business events by linking the new loan type to the seeded workflows. To do this, you add the new loan type to the corresponding LNS_EVENT_ACTIONS tables.
Note: You can disable notifications for a loan type or class. See Enabling Notifications.
Loans automatically generates the text for a notification based on the message parameters seeded in Workflow.
See: Oracle Workflow Administrator's Guide and Oracle Workflow User's Guide.
The five most recent notifications from your worklist appear in the Notifications section of the dashboard. A notification remains on your worklist until the due date of the notification or until you indicate you have reviewed the notification by clicking OK.
Tip: If you want don't want to delete the notification from the worklist or dashboard, then use the Dashboard link to return to the dashboard.
Select the Notification hyperlink to view the notification details. To navigate to the loan section associated with the notification and the most current loan information, select Loan Details in the Reference section.
Tip: You must perform several steps in Oracle Payables to process the funding request for a loan. See Loan Funding for more information.