Loans Are Contracts

Loans are initiated by creating a loan contract for a customer. The loan contract (and its contract type) contains the loan's terms, including the loan amount, periodic payment amount, the number of amortization periods, the interest rate, and the periodicity of the bills. Loan contracts are just like other contracts in many ways:

• The system bills the customer for the periodic payment amount using information on the contract.
• The customer pays the billed amount.
• If the customer doesn't pay, credit and collections may start a collection process to encourage the customer to pay (depending upon how the loan debt class has been set up on your system).

Loan contracts differ from other contracts in the following ways:

• Loans have interest charges.
• Loans have amortization schedules.
• Loan contracts are maintained on a separate transaction (refer to Loan - Main for more information).