Loan Management

Udyamo HRMS includes a built-in loan management module that allows organizations to offer employee loans, track repayments through automatic payroll deductions, and maintain complete loan histories. This module covers the entire loan lifecycle — from defining loan categories and setting eligibility rules to processing applications, approving disbursements, tracking EMI payments, and closing loans.

This chapter walks through every step of configuring and using the loan management feature.

What You Will Learn

• How to create and manage loan categories
• How employees apply for loans
• The loan approval workflow
• EMI calculation and payroll integration
• Tracking remaining balances and loan history
• Loan validation rules
• How to close a loan
• Loan reports

Prerequisites

Required: Before using the loan management module:

• The Loan feature toggle is enabled in Settings > Features
• Payroll is configured and operational (see Running Payroll)
• Employee salary structures are assigned (see Salary Structures)
• At least one loan category is created (covered in this chapter)

Understanding the Loan Model

The Loan model in Udyamo HRMS tracks each loan with the following key fields:

Setting Up Loan Categories

Loan categories define the types of loans your organization offers. Each category sets the maximum amount and interest rate.

Step 1: Navigate to Loan Categories

1. From the sidebar, click Settings.
2. Under the Finance section, click Loan Categories.
3. The Loan Categories list page opens.

Step 2: Create a Loan Category

1. Click Add New (or Create Loan Category).
2. Fill in the required fields:

3. Click Save.

Example Loan Categories

Tip: Create specific loan categories with appropriate limits rather than a single generic category. This makes reporting clearer and allows you to set different interest rates and limits for different purposes.

Step 3: Edit or Delete a Loan Category

1. From the Loan Categories list, click on the category name.
2. Modify the fields as needed and click Save.
3. To delete a category, click the Delete button.

Warning: Deleting a loan category does not affect existing loans issued under that category. However, employees will no longer be able to apply for new loans under the deleted category.

Employee Loan Application

How an Employee Applies for a Loan

1. The employee logs in to Udyamo HRMS.
2. From the self-service portal, navigates to Finance > Loans (or My Loans).
3. Clicks Apply for Loan (or New Loan Request).
4. Fills in the application form:

5. Clicks Submit.

What Happens After Submission

1. The loan request is created with a status of Pending.
2. A notification is sent to the administrator or designated approver.
3. The employee can view their pending request under My Loans.

Loan Validation Rules

Udyamo HRMS applies validation rules when an employee submits a loan request:

Tip: Loan validation rules help protect both the employee and the organization. Configure these rules in Settings > Finance > Loan Settings based on your organization's loan policy.

Loan Approval Workflow

Status Flow

The loan progresses through four statuses:

Pending  -->  Approved  -->  Disbursed  -->  Close

Approving a Loan

1. From the sidebar, click Finance > Loans (or navigate to the Loan Requests page).
2. Filter by status Pending to see all awaiting requests.
3. Click on a loan request to review the details:
   • Employee name and ID
   • Loan category
   • Requested amount
   • Instalment term
   • Employee's current salary and existing loans
4. Review the loan against your organization's policy.
5. Click Approve to approve the loan, or Deny to reject it.
6. If denying, enter a Denial Reason for the employee's reference.

Tip: Before approving, review the employee's existing loan obligations. The system displays active loans (if any) on the approval screen to help you make an informed decision.

Marking a Loan as Disbursed

After approval, the actual disbursement happens outside the system (via bank transfer or cheque). Once the amount has been transferred:

1. Open the approved loan.
2. Click Mark as Disbursed.
3. Optionally enter the disbursement date and reference (cheque number, bank transfer ID).
4. Click Save.
5. The loan status changes to Disbursed and EMI deductions will begin from the next payroll run.

EMI Calculation

Once a loan is disbursed, Udyamo HRMS calculates the monthly EMI based on the loan parameters.

EMI Formula

For loans with interest, the EMI is calculated using the standard reducing balance formula:

EMI = [P x R x (1+R)^N] / [(1+R)^N - 1]

Where:

Example — Loan with Interest

Example — Interest-Free Loan

Tip: For interest-free loans, the EMI is simply the loan amount divided by the number of instalments.

Payroll Integration

Once a loan is in Disbursed status, the monthly EMI is automatically deducted from the employee's salary during payroll processing.

How It Works

Viewing Loan Deductions on Payslips

1. Navigate to Payroll > Payslips.
2. Select the month and click on an employee's payslip.
3. The Deductions section shows Loan EMI (or the specific loan category name) with the monthly deduction amount.

Warning: If an employee is on leave without pay for an entire month and their net salary is zero or less than the EMI, the system may skip the EMI deduction for that month. The remaining amount and term will be adjusted accordingly. Review such cases manually.

Tracking Loan Status and Remaining Balance

Viewing Active Loans

For Administrators:

1. Navigate to Finance > Loans.
2. The list shows all loans across the organization.
3. Filter by Status (Pending, Approved, Disbursed, Close).
4. Click on any loan to see detailed information including:
   • Original loan amount
   • EMIs paid to date
   • Remaining amount
   • Next EMI date
   • Repayment schedule

For Employees:

1. Navigate to My Loans from the self-service portal.
2. View all current and past loans.
3. Click on a loan to see the repayment schedule and remaining balance.

Repayment Schedule Table

The loan detail page shows a repayment schedule:

Closing a Loan

Automatic Closure

When all EMIs are paid and the remaining amount reaches zero, the loan status automatically changes to Close.

Manual Closure (Pre-closure)

An administrator can manually close a loan before all EMIs are paid:

1. Navigate to Finance > Loans.
2. Open the loan to be closed.
3. Click Close Loan (or Pre-close).
4. The system shows the outstanding remaining amount.
5. Confirm the pre-closure. The remaining amount can be:
   • Deducted as a lump sum from the next payroll.
   • Recorded as settled manually (e.g., the employee paid via cheque or bank transfer).
6. Click Confirm.
7. The loan status changes to Close.

Tip: Pre-closure is useful when an employee receives a bonus or wants to clear their loan early. There is typically no pre-closure penalty for employee loans managed through Udyamo HRMS.

Loan Reports

Available Reports

Generating a Loan Report

1. From the sidebar, click Reports.
2. Select Loan Report (or Finance Reports > Loans).
3. Choose the report type (Active, Summary, Deduction, or History).
4. Select the Period (month, quarter, or year).
5. Optionally filter by Loan Category or Department.
6. Click Generate.
7. Review the report and click Export for Excel or PDF download.

Troubleshooting

Next Steps

• Set up Reimbursements — see Reimbursements
• Configure Advance Salary — see Advance Salary
• Review payroll integration — see Running Payroll