Glossary
What is Loan servicing?
Definition
Loan servicing is the management of a loan after it is disbursed: recording and allocating repayments, keeping the schedule and balance accurate, producing receipts and statements, following up overdue accounts and closing the loan. It lasts as long as the loan does.
Servicing is where most errors and disputes arise: a payment applied to the wrong balance, an early repayment not reflected in interest, or a penalty added twice. A repayment allocation order applied consistently, receipts for every payment and a statement showing the schedule and payment history prevent most of them.
Servicing also includes collections, meaning identifying and following up late accounts, and the reporting that shows how the portfolio is performing. Servicing software automates the arithmetic and the record-keeping; the follow-up still needs people.
Learn more
Related terms
See LoanTabs handle this in a live loan book. Browse the full lending glossary.
Start Free Trial