When creating a Credit Product, you can set up “multiple disbursements” in the "Disbursement Options" Settings. When this option is enabled, the loan is provided as a credit line rather than a traditional loan.
How Credit Lines Work
Application Process
When “Multiple disbursements” are enabled, “Max amount” defined in the Basic Schedule Settings becomes the maximum amount of the credit line.
When applying for a loan, Customers can define
Credit Line Limit: The maximum amount that the Customer can draw from the credit line. For example, if the Credit Line Limit is set to $1,000, the borrower can draw up to this amount over time.
Initial Disbursement: The initial amount that will be disbursed to the borrower when the credit line is first approved. For instance, if the Initial Disbursement is set to $501, this amount will be provided to the borrower with the first disbursement, while the remaining credit limit can be drawn as needed.
Disbursement Process
When initiating the disbursement process, you can disburse any amount within the credit line limit. The interface allows you to specify the amount to be disbursed, as shown in the example where $100 is being disbursed. The disbursed amount is tracked, and the repayment schedule is adjusted based on the disbursed amount.
Impact on Repayment
Repayment Schedule: The repayment schedule for a credit line is planned for the amount already disbursed to the Customer. Unlike traditional loans with fixed disbursements, you can disburse funds up to the approved limit as needed, and the repayment schedule will adjust accordingly.
Interest and Fees: Interest and fees are calculated based on the outstanding balance of the credit line. Borrowers only pay interest on the amount they have drawn, not the total approved limit.
Flexibility: Borrowers can repay the drawn amount and borrow again within the approved credit limit, providing greater flexibility in managing their finances.
Changing the Credit Line Limit
The credit line limit can be adjusted as needed. For example, if a borrower's financial situation changes, a back-office user can modify the credit line limit. The interface allows the user to specify the new credit limit and provide a comment explaining the reason for the change. Once updated, the repayment schedule will be adjusted to reflect the new credit limit, ensuring that all future disbursements and repayments are managed accurately.
