- 07 Apr 2022
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Linking Deposit and Loan Accounts
- Updated On 07 Apr 2022
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A settlement deposit account allows you to have a deposit account that is automatically used as a source for loan repayments. On the day a repayment becomes due, the amount is automatically transfered from the settlement deposit account to the loan account. Settlement deposit accounts are sometimes also simply referred to as settlement accounts (for example in the Mambu UI).
There are two main advantages of using settlement deposit accounts:
- It allows organizations to collect money from clients into a deposit account and if the client also has a loan, to automatically transfer the repayment amount from the deposit account when a repayment on the loan is due.
- It reduces the probability of having pre or late repayments, since the money is in another account and is automatically transferred on the actual repayment due date.
Enabling linked accounts
The option to enable linked accounts is under every loan product's settings. Once you enable it, you can choose the settlement deposit product that you want the loan product to be linked to. Here you have an option to choose either Any, meaning that you’ll be able to link loan accounts created under this product to any deposit product available, or you can choose a specific deposit product. If you decide to link the loan product to a specific deposit product, you will find two different options available:
- Auto-Set Settlement Accounts on Creation: Any loan account you create under that product will automatically link to the client's deposit account, if they have one. If the client has several deposit accounts, the loan won't be automatically linked to any of the deposit accounts and you will have to link the correspondent accounts manually.
- Auto-Create Settlement Account: If the client doesn't have a deposit account yet and this option is selected, Mambu will automatically create one when you open a new loan for that client and link both accounts.
The auto-set and auto-create options are not yet available for deposit accounts with Overdraft. These deposit accounts with overdraft enabled can only be manuallly linked to loan products as settlement deposit accounts.
Choose a settlement option from the following three available for linked products:
- Only transfer full dues: the transfer of funds will only be performed if there are enough funds in the deposit account to cover the entire amount of the installment due, otherwise nothing will happen.
- Allow partial transfers: even if the funds in the deposit account are not enough to cover the entire amount of the installment due, the transfer will still happen.
- No automated transfers: the accounts will be linked, but automated transfers between the deposit and loan account will not be made.
You can create settlement deposit accounts as offsets for loan accounts. For more information, see Redraw and Offset Settings.
When linking two accounts, both the loan and deposit products used to create the accounts must have the same accounting setup. For more information, see Accounting Setup.
Transfers between linked accounts
When a transfer occurs, all the product rules continue to be respected, which means that if the deposit account is not allowed to go negative and the funds are not sufficient to make the repayment, then the transfer will not be made and the loan account goes into arrears.
If a deposit account is the settlement deposit account of more than one loan account, the automated transfers will happen in the order the accounts were linked.
A deposit account can be linked to several loan accounts, but a loan account can only be linked to a single settlement deposit account.
You can't have a loan account and a linked settlement deposit account on different branches. When a loan account is linked to a settlement deposit account, if you change the branch of the loan account, it will automatically change the branch of the settlement deposit account as well, unless the settlement deposit account is linked to other loan accounts. When removing the link between the settlement deposit account and the loan account, the settlement deposit account will be moved to the client's branch.