What is lending limit in SAP FS-CMS - Collateral Management System?

SAP Term: lending limit

• Component: FS-CMS

• Component Name: Collateral Management System

• Description: The maximum percentage of the lending value of a object, that a bank is permitted to lend in accordance with legal and statutory requirements. A distinction is made between the lending limit as an amount and the lending limit as a percentage, also called as lending rate.

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• Key Concepts: 
  Lending limit is a feature of the FS-CMS Collateral Management System (CMS) that allows lenders to set a maximum amount of money they are willing to lend to a borrower. This limit is based on the borrower's creditworthiness and the lender's risk appetite. The lending limit helps lenders manage their exposure to risk and ensure that they are not overextending themselves.
  
  How to use it: 
  The lending limit can be set by the lender in the CMS. The lender can specify the maximum amount of money they are willing to lend to a borrower, as well as any other criteria they wish to use in determining the limit. Once the limit is set, the CMS will automatically reject any loan requests that exceed the limit.
  
  Tips & Tricks: 
  It is important for lenders to regularly review their lending limits and adjust them as needed. This will help ensure that they are not overextending themselves and taking on too much risk. Additionally, lenders should consider setting different limits for different types of borrowers, such as those with higher credit scores or those with lower credit scores.
  
  Related Information: 
  The lending limit feature of the FS-CMS Collateral Management System is just one of many features designed to help lenders manage their risk exposure. Other features include loan origination, loan servicing, and loan monitoring. Additionally, lenders can use analytics tools to better understand their borrowers and make more informed decisions about their lending limits.