> ## Documentation Index
> Fetch the complete documentation index at: https://help.agatabo.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Loans Overview

> Understanding loan management, portfolio tracking, and loan operations in Agatabo

## What are Loans?

In Agatabo, **loans** are funds disbursed from the organization's pooled savings to members who need credit. Loans have specific terms including principal amount, interest rate, repayment schedule, and optional securities (guarantors, collateral).

Loans are the primary revenue source for organizations - interest income from loans generates profits that are distributed to members as dividends.

## How Loans Work

<Steps>
  <Step title="Member applies for loan">
    Submits application with amount, purpose, and proposed terms
  </Step>

  <Step title="Loan committee reviews">
    Evaluates member's savings, repayment capacity, and purpose
  </Step>

  <Step title="Loan officer creates loan in Agatabo">
    Uses 5-step wizard to configure loan rules, securities, and bank details
  </Step>

  <Step title="Loan created and funds disbursed">
    System automatically creates journal entries and releases cash to member
  </Step>

  <Step title="Member makes payments">
    Treasurer records payments according to installment schedule
  </Step>

  <Step title="Loan is fully repaid">
    Final payment brings balance to zero
  </Step>
</Steps>

## Key Metrics

### Portfolio Outstanding

**Portfolio Outstanding** is the total amount loaned to all members (sum of all outstanding loan balances). This appears on the dashboard and represents the organization's loan receivable asset.

**Example**: If you have:

* 10 active loans
* Loan balances: 500K, 300K, 200K, 150K, 100K, 90K, 80K, 70K, 60K, 50K
* **Portfolio Outstanding** = 1,600,000 RWF

### Arrears

**Arrears** are overdue amounts on loans. Includes past-due principal, interest, and penalties. Arrears indicate members who are behind on payments.

**Example**: If a member was supposed to pay 50,000 RWF on June 1 but hasn't, that 50,000 RWF is now in arrears.

### Delinquent Loans

**Delinquent loans** are loans with any amount in arrears (at least one payment overdue). This metric tracks portfolio health.

**Example**: 10 active loans, 3 have overdue payments = 3 delinquent loans = 30% delinquency rate

## Loan Lifecycle

### 1. Application & Approval

**Application** (outside Agatabo):

* Member submits loan request
* Provides purpose, amount, proposed securities
* May attend committee interview

**Committee evaluation**:

* Review member's savings history
* Check existing loans (is member current?)
* Assess repayment capacity
* Verify securities (guarantors available, collateral value)

**Approval decision**:

* Approved amount (may be less than requested)
* Interest rate and term
* Required securities

### 2. Loan Creation

**Loan officer uses Agatabo:**

<Steps>
  <Step title="Step 1: Basic Information">
    Borrower, principal amount, period, start date, purpose
  </Step>

  <Step title="Step 2: Loan Rules">
    Interest rate, calculation type, installment type, payment allocation, disbursement fees
  </Step>

  <Step title="Step 3: Securities">
    Guarantors, collateral, savings lien
  </Step>

  <Step title="Step 4: Bank Details">
    Bank account, bank charges
  </Step>

  <Step title="Step 5: Review & Submit">
    Review all details and submit
  </Step>
</Steps>

[Detailed guide →](/tontines/loans/creating-loans)

### 3. Disbursement

**What happens** (automatically during loan creation):

* Agatabo creates journal entries:
  * Debit: Loan Receivable (principal amount)
  * Debit: Interest Receivable (total interest, if paid with installments)
  * Credit: Cash (principal minus any fees)
  * Credit: Interest Income (total interest recognized)
  * Credit: Disbursement Fee Income (if fee charged)
* Member's loan ledger account is created
* Installment schedule is generated
* Cash is released to member (bank transfer, mobile money, or cash)

<Note>
  **Note**: Loan creation and disbursement happen atomically in a single transaction. There is no separate disbursement step after loan creation.
</Note>

### 4. Repayment

**Members make payments**:

* According to installment schedule (monthly, quarterly, etc.)
* Treasurer records each payment in Agatabo
* Payments are allocated between principal and interest

[Recording payments →](/tontines/loans/recording-loan-payments)

### 5. Completion or Default

**Successful repayment**:

* Final payment brings balance to zero
* Loan status changes to "Fully Repaid"
* Member can apply for a new loan

**Default**:

* Member stops paying, arrears accumulate
* Organization follows collection process:
  1. Reminders and follow-up
  2. Apply penalties
  3. Contact guarantors
  4. Seize collateral (if applicable)
  5. Write-off (last resort)

[Loan Defaulting →](/tontines/loans/loan-defaulting)

## Loan Rules Explained

Loan rules determine how interest is calculated and payments are structured:

### Interest Calculation Type

<Tabs>
  <Tab title="SIMPLE">
    Interest on original principal only

    **Example**: 100,000 RWF at 5% monthly for 12 months

    * Total interest = 100,000 × 0.05 × 12 = 60,000 RWF
  </Tab>

  <Tab title="REDUCING_BALANCE">
    Interest on outstanding balance (decreases as principal is repaid)

    **Example**: 100,000 RWF at 5% monthly for 12 months

    * Month 1 interest: 5,000 RWF
    * Month 12 interest: \~400 RWF
    * Total interest: \~43,000 RWF

    **Most common for commercial-style loans**
  </Tab>

  <Tab title="COMPOUND">
    Interest on principal + accumulated interest (functionally equivalent to REDUCING\_BALANCE for monthly installments)

    **Example**: 100,000 RWF at 5% monthly for 12 months

    * Total interest ≈ same as REDUCING\_BALANCE

    **Note**: For monthly compounding, COMPOUND behaves the same as REDUCING\_BALANCE
  </Tab>
</Tabs>

[Detailed explanation with tables →](/tontines/loans/loan-rules-explained)

### Installment Type

**EQUAL\_PRINCIPAL**: Same principal each month, declining total payment

* Example: 10,000 principal + decreasing interest

**EQUAL\_TOTAL**: Same total payment each month (amortized)

* Example: 13,361 every month
* **Most common**

### Payment Allocation Order

**INTEREST\_FIRST**: Pay all interest, then principal

* **Most tontines use this**
* Ensures interest revenue is collected

**PRINCIPAL\_FIRST**: Pay all principal, then interest

* Reduces debt faster
* Less common

**PROPORTIONAL**: Split based on ratio of principal to interest

* Fair for partial payments

## Common Loan Operations

<CardGroup cols={2}>
  <Card title="Creating Loans" icon="plus" href="/tontines/loans/creating-loans">
    5-step wizard for loan setup
  </Card>

  <Card title="Recording Payments" icon="money-bill-transfer" href="/tontines/loans/recording-loan-payments">
    Track member repayments
  </Card>

  <Card title="Viewing Loan Details" icon="file-lines" href="/tontines/loans/viewing-loan-details">
    Review installment schedule and history
  </Card>

  <Card title="Applying Penalties" icon="circle-exclamation" href="/tontines/loans/applying-penalties">
    Charge late fees for overdue payments
  </Card>

  <Card title="Modifying Loans" icon="pen-to-square" href="/tontines/loans/modifying-loans">
    Increase principal or extend period
  </Card>

  <Card title="Loan Analytics" icon="chart-line" href="/tontines/loans/loan-analytics">
    Monitor portfolio health and arrears
  </Card>
</CardGroup>

## Securities

Securities protect the organization in case of default:

### Types of Securities

**Guarantors**: Other members who commit to repay if borrower defaults

* Example: Jane guarantees 100% of John's 500,000 RWF loan

**Collateral**: Physical assets pledged against the loan

* Example: Land title valued at 2,000,000 RWF

**Savings Lien**: Member's own savings frozen until loan repaid

* Example: 200,000 RWF of borrower's savings held as security

[Learn more →](/tontines/loans/securities-and-guarantors)

## Loan Analytics

Agatabo provides insights into loan portfolio health:

### Key Reports

* **Loan portfolio by status**: Active, fully repaid, written off
* **Arrears aging**: 1-30 days, 31-60 days, 60+ days overdue
* **Loan performance by member**: Track repeat borrowers
* **Interest income trends**: Revenue generated from loans
* **Delinquency rate**: Percentage of loans in arrears

[Detailed analytics →](/tontines/loans/loan-analytics)

## Best Practices

<Note>
  **Loan management tips:**

  * Verify member's savings history before approving loans
  * Use REDUCING\_BALANCE with EQUAL\_TOTAL for standard loans
  * Always require at least one security (guarantor or collateral)
  * Set first payment date exactly one month after disbursement
  * Record payments promptly to keep arrears accurate
  * Apply penalties consistently for late payments
  * Follow up on arrears within 7 days of missed payment
  * Print installment schedule for borrower's reference
  * Document unusual terms or agreements in loan notes
</Note>

## Integration with Other Features

### Deposits

Loans are often limited based on savings:

* Common rule: "Maximum loan = 3× savings balance"
* Disbursement fees and advance interest can be deducted from savings (configurable)
* Loan payments can be deducted from savings
* Encourages members to save before borrowing

[Learn about deposits →](/tontines/deposits/overview)

### Interest Income

Loan interest generates revenue:

* Interest income appears on Profit & Loss statement
* Net income (after expenses) distributed as dividends
* Higher loan portfolio = higher interest income

### Financial Reports

Loans appear in multiple reports:

* **Balance Sheet**: Loan Receivable (asset)
* **Profit & Loss**: Interest Income (revenue)
* **Cash Flow**: Loan disbursements (cash outflow), loan payments (cash inflow)

[Learn about reports →](/tontines/reports/overview)

## Common Questions

<AccordionGroup>
  <Accordion title="What's a reasonable interest rate?">
    **It varies by region and organization:**

    **Typical rates:**

    * 1-5% per month (12-60% annual)
    * Higher than commercial banks (10-20% annual)
    * Lower than payday lenders (100%+ annual)

    **Factors to consider:**

    * Commercial bank rates in your area
    * Risk of default (higher risk = higher rate)
    * Operating expenses (staff, office, etc.)
    * Member affordability

    **Recommendation**: Survey other organizations in your area for competitive rates.
  </Accordion>

  <Accordion title="Can I change loan terms after creation?">
    **Limited changes allowed:**

    **You CAN:**

    * Increase principal amount (via loan modification)
    * Extend loan period (via loan modification)
    * Modify individual installment amounts
    * Modify individual due dates
    * Apply or waive penalties

    **You CANNOT change:**

    * Interest rate
    * Interest calculation type
    * Installment structure (EQUAL\_TOTAL vs EQUAL\_PRINCIPAL)
    * Payment allocation order
    * Decrease principal amount
    * Shorten loan period

    [Learn about modifying loans →](/tontines/loans/modifying-loans)
  </Accordion>

  <Accordion title="What if a member defaults?">
    **Collection process:**

    <Steps>
      <Step title="Apply penalties">
        Charge late fees according to policy
      </Step>

      <Step title="Contact member">
        Phone, SMS, or in-person follow-up
      </Step>

      <Step title="Invoke guarantors">
        Request guarantors to pay on behalf
      </Step>

      <Step title="Seize collateral">
        If collateral was pledged, sell to recover
      </Step>

      <Step title="Write-off (last resort)">
        Remove from active portfolio, record as loss
      </Step>
    </Steps>

    [Learn about loan defaulting →](/tontines/loans/loan-defaulting)
  </Accordion>

  <Accordion title="How do I handle a member who wants to pay off a loan early?">
    **Early repayment options:**

    1. **Allow without penalty**: Member pays remaining balance, saves on interest (if REDUCING\_BALANCE)
    2. **Charge prepayment penalty**: Compensate for lost interest income (less common)
    3. **Calculate full interest anyway**: Member pays all interest even if early (not recommended)

    **In Agatabo:**

    * Record a payment for the full remaining balance
    * System automatically allocates to principal and interest
    * Loan status changes to "Fully Repaid"

    Check your organization's policy on early repayment.
  </Accordion>
</AccordionGroup>

## Getting Started

<CardGroup cols={2}>
  <Card title="Create Your First Loan" icon="rocket" href="/tontines/loans/creating-loans">
    Step-by-step loan creation guide
  </Card>

  <Card title="Understand Loan Rules" icon="book-open" href="/tontines/loans/loan-rules-explained">
    Detailed examples of interest calculations
  </Card>

  <Card title="Loan Disbursement Workflow" icon="list-check" href="/tontines/workflows/loan-disbursement-workflow">
    Complete checklist for processing loans
  </Card>

  <Card title="Recording Payments" icon="money-bill-transfer" href="/tontines/loans/recording-loan-payments">
    Track member repayments
  </Card>
</CardGroup>