Category: 

What Are Loans in Process?

Article Details
  • Written By: G. Wiesen
  • Edited By: Shereen Skola
  • Last Modified Date: 06 September 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
  • Print this Article
Free Widgets for your Site/Blog
Due to synthetic materials and furnishings, new homes burn about five times faster than those built 30 years ago.  more...

September 25 ,  1789 :  The US Bill of Rights was adopted.  more...

Loans in process are those that a financial institution is committed to paying, which have been recorded, but have not been fully disbursed. There are a number of reasons in which an organization might be committed to making payments on a loan over time, such as student loans. These can be adjustable loans that may not need to be paid to a borrower in full, or can simply be divided over a certain period of time. Loans in process are typically recorded as an asset for the lender, even though they have not yet been fully paid out.

As the name suggests, loans in process are in the “process” of being distributed, rather than those that are fully paid out and are being repaid. A simple example of this type of loan would be student loans that are awarded at the beginning of the year, but which pay out each semester. At the start of the year, half of their full value could be paid out to students, and they would then be loans in process. Once the second semester began, and the rest of the loans were paid out, then they would no longer be in process and would be complete.

Ad

Another common example of how loans in process can be used is an account that can be opened for home improvements or construction. A homeowner pays a certain amount into this account as the initial capital for the construction work. Payments withdrawn from the account would begin with this deposited amount, before then taking out loans in process for additional financial needs. This allows people to begin paying on a project using their own money, then shifting to loans as needed during the span of the project. Even though initial capital from a borrower is used, the lender commits to the loan value up front.

The importance of loans in process is that they are committed to by the lender at the beginning of a project or time span. Once a bank or other lending institution agrees to pay out this type of loan, the full value and total can be placed on its books to reflect the total loan. These loans in process, therefore, may appear to diminish the resources of a company or organization even though more assets are technically available. Repayment on these loans can also appear as an asset to a lender, even though they are not fully paid out and have not yet begun to be repaid.

Ad

You might also Like

Recommended

Discuss this Article

Post your comments

Post Anonymously

Login

username
password
forgot password?

Register

username
password
confirm
email