Credit Lines, Loan Agreements, and Notes

Chinese source: 授信、合同与借据 Locale: en-US Audience: Internal learning

Concept

Credit lines, loan agreements, and loan notes are the three objects most often confused in loan core.

Credit line = how much exposure the bank makes available
Loan agreement = the legal and product terms for borrowing and repayment
Loan note = the actual loan asset created after disbursement

A customer can have multiple credit lines. One line can support multiple loan agreements. One agreement may also support multiple drawdowns, each creating a note.

Object Model

flowchart TD
  A["Customer"] --> B["Credit Line"]
  B --> C["Loan Agreement"]
  C --> D["Loan Note / Drawdown"]
  D --> E["Repayment Schedule"]
  D --> F["Receivables"]
  C --> G["Collateral Agreement / Collateral"]

Core Objects

Object	Role	Typical Fields
Credit line	Controls available credit exposure.	Line number, total limit, available limit, expiration, status.
Loan agreement	Stores legal and product terms.	Agreement number, product, amount, term, rate, repayment method.
Loan note	Records the booked loan asset.	Note number, disbursed amount, principal balance, start date, maturity.
Repayment schedule	Defines due amounts by period.	Installment number, due date, due principal, due interest.
Receivables	Records earned or due amounts not yet collected.	Principal due, interest due, penalty interest, fees.

Usage and Release of Credit Lines

Credit-line usage may occur at agreement signing, drawdown request, or actual disbursement, depending on the system design. Repayment, cancellation, expiration, or payoff may release availability.

When reading screens, check:

• Whether the page shows total, available, frozen, or used limit.
• Whether usage occurs at agreement stage or disbursement stage.
• Whether prepayment, partial repayment, or charge-off releases availability.
• Whether the line is segmented by product, currency, branch, or collateral type.

Rules and Risks

Risk	Explanation
Agreement amount exceeds the line.	System should prevent over-limit lending.
Note amount exceeds remaining agreement amount.	Critical for multiple drawdowns.
Agreement status and note status conflict.	A terminated agreement should not allow new disbursement.
Disbursement before collateral is perfected.	Important for secured lending.
Incorrect limit release.	Distorts customer availability and bank exposure.

Related Topics

Topic	Use
Loan Lifecycle	See where each object appears in the process.
Collateral, Pledges, Mortgages, and Guarantees	Understand collateral linkage.
Disbursement, Repayment, and Accounting Entries	Understand how notes become booked assets.