Loan Product Setup
Configuration and management of Loan Products
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Configuration and management of Loan Products
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Loan products define the terms and structure for how loans are issued, managed, and repaid while ensuring compliance with regulatory requirements.
In Mobiloan, users have the flexibility to configure multiple loan products, each tailored with unique settings such as limits, product classes, and permissions.
This allows businesses to cater to various lending needs and customize loan offerings based on their target market.
When setting up a new loan product, the following critical configurations must be defined:
Regular Costs: These are standard fees charged during loan issuance, including administrative or service fees. Late Costs: These penalties are applied if a borrower fails to make payments on time, usually calculated as a percentage of the overdue amount. Permissions: Specifies the individuals or roles who are authorized to approve, modify, or view loans. Example: Only branch managers can approve loans above R5,000.
Discounts: Incentives provided to borrowers who repay their loan early or are loyal customers.
To configure loan products , select an existing loan product from the table to edit or click the “+” icon to create a new loan product.
In this step, the user is required to choose both the name and the credit type for the new loan product. Each credit type comes with its own specific cost configuration settings, ensuring that the system automatically enforces compliance. As a result, it is not possible to create a cost configuration that would violate the regulations for any given credit type, providing assurance that all configurations remain compliant with industry standards.
Below is a table summarizing the credit types, their best uses, the maximum interest rate limitations, and key notes based on South African National Credit Act guidelines:
Credit Type
Best Suited For
Maximum Interest Rate
Key Limitations / Notes
Mortgage Agreement
Financing long-term property purchases secured by immovable assets
(Reference Rate × 2.2) + 5% per annum
Requires rigorous affordability assessments and property valuation constraints
Credit Facility
Providing revolving credit (e.g. credit cards, overdrafts) for everyday transactions
(Reference Rate × 2.2) + 10% per annum
Fees (initiation/service) are strictly regulated and transparent
Unsecured Credit
Personal loans or credit without collateral for various consumer needs
(Reference Rate × 2.2) + 20% per annum
Subject to strict affordability checks and debt-to-income assessments due to the absence of security
Small Business Development
Financing growth or start-up costs for small enterprises
(Reference Rate × 2.2) + 20% per annum
Borrowing limits are determined by business viability; associated fees are regulated
Low Income Housing
Supporting affordable housing projects for low-income consumers
(Reference Rate × 2.2) + 20% per annum
Designed to keep credit affordable with strict fee controls and regulatory oversight
Short Term Transaction
Micro-loans or small-scale credit repaid within a short period (typically up to six months)
5% per month
Loan amounts are usually low (often not exceeding R8,000) to reflect the short repayment term and higher risk profile
Incidental Credit Agreement
Credit provided as a by-product of another transaction (e.g. utility accounts, retail purchases with a grace period)
2% per month (if overdue)
Generally used for lower amounts; interest only applies if payments are overdue
Other Credit Agreement
Flexible or mixed-purpose loans that do not neatly fit into the other categories
(Reference Rate × 2.2) + 10% per annum
Must adhere to the same fee and affordability guidelines as other regulated credit products
In this step, the user is required to set lending parameters, as well as define the maximum and minimum values for the current loan product, as outlined below.
Minimum Loan Capital Amount This defines the smallest loan amount that can be issued, ensuring both the lender and borrower find the loan practical.
Maximum Loan Capital Amount This sets the upper limit on the loan amount to prevent over-borrowing, thus maintaining financial health for both parties.
Cooling-Off Period This is the timeframe within which a borrower can cancel their loan without incurring any penalties or fees. It provides an opportunity for borrowers to reconsider their loan decision without financial consequence.
Capital Rounding Loan amounts are rounded to the nearest specified value after fees are applied, ensuring the final amount remains practical and manageable for repayment.
Mobiloan enforces a maximum loan amount of R7,100 for all NCR Short-Term Loan Products to ensure compliance with regulatory limits.
Regulatory Context
The National Credit Act (NCA) defines a "short-term credit transaction" as a deferred amount that, at the start of the agreement, does not exceed R8,000. If a borrower cannot pay the initiation fee upfront, it may be included in the deferred amount, upon which interest is calculated.
Compliance Considerations for Credit Providers
To remain within the NCA’s R8,000 limit, credit providers must ensure that the combined total of the principal debt and the deferred initiation fee does not exceed this threshold.
For non-VAT-registered credit providers:
The maximum principal debt should not exceed R7,213.64.
The initiation fee (excl. VAT) will be R786.36, bringing the total deferred amount to R8,000.
For VAT-registered credit providers:
The maximum principal debt should not exceed R7,107.85.
The initiation fee (incl. VAT) will be R892.15, ensuring the total remains R8,000.
By adhering to these limits, credit providers maintain compliance with NCA regulations while ensuring responsible lending practices
The Future Payout feature allows users to configure the timeframes between loan approval and payout. If any of the following values are set above zero, the feature will be enabled.
Minimum Days Before Scheduled Payout Defines the shortest period between loan approval and the disbursement of funds.
Maximum Days Before Scheduled Payout Defines the maximum allowable time between approval and payout, providing flexibility for both the lender and borrower.
Minimum Loan Period This defines the shortest allowable duration for loan repayment, ensuring borrowers have enough time to manage their payments while minimizing risk for the lender.
Maximum Loan Period This sets the longest allowable repayment period, ensuring timely loan closure and preventing excessively prolonged debt cycles.
Minimum Days Before First Instalment Sets the earliest date that the first repayment can occur after the loan is disbursed.
Maximum Days Before First Instalment Defines the latest possible date for the first repayment, ensuring that repayments start within a reasonable time after the loan is disbursed.
Instalment Rounding Instalment amounts can be rounded to ensure they remain easily manageable and affordable for borrowers.
The screenshot displays the required settings to configure at this stage
Here you would configure the costs of the credit type by setting up the Initiation Fee, Service Fee and Interest amounts. (That is if the "Short Term Transaction" credit type was chosen earlier in Step 1, if not, then the requirmenst would be different).
NCR sets a maximum initiation percentage of 15%.
Option to apply interest on deferred initiation fees, based on the total payable amount.
Calculated Pro-Rata and capped at R60.00 per instalment (per NCR regulations).
Can be applied to each calendar month the loan remains active- this allows for the full service fee charge for the pro-rata of a given month + a full month if the loan is actove over two months.
Capped Service Fee You can define a maximum period and an extended service fee to ensure that the calculation of the service fee never exceeds a specified amount.
First Annual Interest: 5% per year (applies to the first loan taken by a client in a calendar year).
Monthly Interest: 3% per month (applies to all subsequent loans).
The screenshot displays the required settings to configure at this stage
Additional Features
Select the "Set Maximum Fees" option to override all fees with NCR's maximum allowable rates based on the credit type.
Select the "Sample Product" option to start a loan quotation and view the calculated repayment components based on the current configuration.
In this step, the user is required to add any additional late settlement costs and specify conditions under which these charges will apply or cease.
Below are the available options and configurations:
Once-off Penalty Fee - A fixed charge that is applied when a payment is late. This penalty can be a one-time fee for each overdue payment.
Interest on Overdue Amounts - Enables interest to be applied to unpaid balances. This interest can be applied to various amounts, such as:
Capital (Principal Loan Amount): Interest applied to the original loan amount.
Initiation Fee: Interest applied to the initial fee for loan setup.
Service Fee: Interest on fees charged for managing the loan.
Interest on Overdue Interest: Compounded interest applied to overdue interest amounts, escalating the total amount due.
Discounts: Interest may be applied to any discounts or reductions.
Credit Life Insurance: If applicable, interest can also be charged on insurance premiums tied to the loan.
VAT: Interest may be applied to Value Added Tax associated with the loan.
Service Fee A recurring charge for managing overdue accounts, typically applied monthly or as specified in the loan agreement.
Late settlement charges can be stopped under the following conditions:
Induplum - Charges stop when the total amount due equals the original loan amount. This means the loan is considered paid in full, even if there are overdue charges.
Deceased - Charges stop if the borrower passes away, halting further penalties or fees.
Handed Over - Charges stop when the loan is transferred to collections, as the account is no longer managed directly by the lender.
Written Off - Charges stop when the loan is officially written off, meaning the lender acknowledges the debt as uncollectible.
Grace Days - Specifies the number of days after the due date before penalties or late settlement fees are applied. This grace period allows the borrower time to settle their debt without incurring immediate penalties.
Grace Amount - Defines the maximum amount exempt from late settlement fees during the grace period. This ensures that smaller amounts or partial payments are not penalized during the grace period.
Example Configuration
If you want to:
Charge a one-time penalty fee.
Apply late interest to capital and service fees.
Stop costs at Induplum.
Allow a 5-day grace period before applying penalties.
You would configure the system as follows:
Enable Once-off Penalty Fee, Capital, and Service.
Set Induplum as the cessation trigger.
Set 5 days after the due date as the grace period.
Enter R50 as the penalty fee amount.
The screenshot displays the required settings to configure at this stage
This step requires the user to configure the following Authorization Settings:
Authorized Categories: Defines which client types qualify for the loan product.
Authorized Branches: Specifies branches that can issue the loan.
Authorized Instalment Frequencies: Determines repayment schedules (Monthly, Fortnightly, Weekly).
Authorized Loan Types: Defines eligible clients (New, Dormant, Repeat, Top-Up).
Authorized Commission Rules : Specifies which commission rules are eligible to earn commission off this loan product.
Authorized Insurance Products: Defines which insurance policies are authorized for this loan product.
Enforce Credit Life : Checkbox to enforce credit life as compulsory when this loan product is chosen.
This step allows the user to configure various discount options for the loan product. It consists of two primary functions: setting a maximum cost of credit percentage and defining an employer discount rule. These configurations provide flexibility in how discounts are applied and controlled.
Allocating a Maximum Cost of Credit Percentage
The maximum cost of credit setting ensures that the total costs associated with the loan, including initiation fees, service fees, and interest, will never exceed a certain percentage of the capital borrowed.
This helps manage the overall financial burden on the borrower and ensures that the cost of credit remains within an affordable range.
Defining an Employer Discount Rule
The employer discount rule applies a percentage discount to the total cost of credit, specifically for employees of a designated employer.
This rule helps incentivize employers to partner with the lender by offering discounts to their employees, enhancing employee benefits.
Cost of Credit Calculation Method
This option allows the user to define how the total cost of credit is calculated. The available methods are:
Fixed - The total cost of credit is calculated based on fixed values inputted, regardless of the loan's installment length. This method ensures consistency in pricing.
Relative - The total cost of credit is calculated based on a 30-day installment period. This method may lead to smaller discounts as it adjusts for varying repayment schedules.
Defining an Employer Discount Rule
Each employer discount rule is configured using the Employer Discounts Table. The table allows users to define rules based on the following columns:
Employer: The employer associated with the discount.
Loan Type: Specifies the loan categories to which the discount applies (e.g., First, Dormant, Repeat, Top-Up).
Instalment Frequency: The frequency of loan payments (e.g., Monthly, Weekly, Fortnightly, or All).
Discount Percentage: The percentage discount applied to the total cost of credit. Example: 15% discount on the total cost of credit for eligible employees.
To Create a New Rule: Click the dropdown arrow in the Discount Rule Table and select "Insert New Row."
To Modify an Existing Rule: Click the menu icon next to the row and select either Edit or Remove to make changes.
The screenshot displays the required settings to configure at this stage
The Loan Product setup is now complete. Please ensure that all required fields are filled in. You can now verify that the new Loan Product object has been successfully created.
