Galileo is developing a new installment loans product to offer your customers loans for purchases as part of the Buy Now, Pay Later service. When you set up an installment loans product, you work with Galileo to configure loan subproducts that have varying terms, interest rates, fees, payments, and other settings, according to your business requirements.
This guide describes the requirements for standing up a lending program, as well as the configuration options for loan subproducts.
## Acquire a lending license
You and/or your partner bank must be appropriately licensed for each state where you intend to loan funds. You should also be familiar with lending regulations and consumer protection, such as Regulation Z, state lending laws, and the Fair Credit Reporting Act. If you don’t have a lending license, your partner bank typically will.
## Determine loan underwriting process
Galileo does not provide underwriting. You determine the risk of underwriting each customer and how much the customer can afford to borrow. You can choose to set up underwriting in house or partner with a third-party underwriter to determine a cardholder has the correct qualifications.
## Handle debt facility
You will need a debt facility to supply the capital for the loans. This may or may not be your bank partner.
## Manage customer records
You are responsible for ensuring that any customer that you wish to create loans for has a DDA account with Galileo. If the customer does not have a DDA, they will need to create one. In addition, you must ensure that the customer records that exist on Galileo include first name, last name, and date of birth. When you create a loan, we will use these attributes on the loans, so they cannot be empty.
## Establish fees and repayment schedule
You are responsible for handling all aspects of the loan, including approval, interest rates, term length, and fee collection. This is set by configuring the loan subproducts for your installment loan product. See the [Assign installment loan subproducts]() for more details on subproducts.
## Establish money movement rules
You are responsible for determining the money movement rules. This includes:
Recording disbursements to move money from the lending bank to the DDA bank.
Processing payments from an external account.
Design logic for handling outstanding loans in case of merchant credits, returns, etc.
## Simulate loan offerings
You determine if you want to simulate the different loan offerings to the customers before they accept the terms. This allows customers to compare the different APRs and loan terms, and empowers them to make an informed decision about the loan offerings.
## Assign installment loan subproducts
You can configure installment loan subproducts to customize your Buy Now, Pay Later offerings. Each subproduct is assigned a unique subproduct ID that you will send to Galileo when you create a loan. You work with Galileo directly to set up the subproducts for your BNPL offering.
This table lists configuration options for loan subproducts, including a description and possible values for each option.
|Interest rate||Percentage||Specifies the interest rate for the loan, between 0% and 35%. There is a separate calculated Military APR (MAPR) that may be higher than the APR. If the MAPR exceeds 36%, the loan simulation will be rejected.|
|Loan amount||Minimum and maximum dollar amount for the loan||Specifies the range of valid dollar amounts for the loan.|
|Has origination fee||Yes or No||Controls whether the subproduct has an origination fee. An origination fee is charged at the creation of the loan. The origination fee is added to the total loan amount and is financed instead of charged separately.|
|Origination fee type||Fixed or Percentage||Specifies whether the origination fee is a fixed dollar amount or a percentage of the loan. This setting is only valid when there is an origination fee.|
|Installment fee||Percentage||Specifies the installment fee assessed on the total loan amount at the start of the loan. The rate is multiplied by the total loan amount and divided across the number of installments.|
|Has late fee||Yes or No||Controls whether a late fee is applied to the loan balance when a payment is missed. You can specify a grace period during which a late fee is not charged. When this is set to No, a late fee is never applied.|
|Late fee||Dollar amount||Specifies the dollar amount for the late fee applied to the loan balance when a payment is missed. States have different rules about the maximum late fee that may be applied. Therefore, the late fee for the subproduct should not exceed the lowest maximum late fee for the group of states where you intend to offer loans.|
|Grace period||Number of days||Controls the number of days in the grace period. When a payment is missed, a late fee is applied to the loan only after the grace period ends. If the grace period is 0 days, the late fee is applied to the loan immediately after a payment is missed.|
|Term||Minimum and maximum term length||Specifies the range of valid term lengths for the loan. Use in conjunction with the Term product subproduct to indicate whether this number is years, months, weeks, or days.|
|Term product||Years, Months, Weeks, or Days||Specifies whether the term unit for the loan is years, months, weeks, or days. Use in conjunction with the Term subproduct to specify the minimum and maximum term length.|
|Subproduct name||Full name of the subproduct||Contains a description of the subproduct.|
|Subproduct short name||Description of the subproduct||Contains the name of the subproduct.|
|Accrual method||Actual/365 or Actual/360||Specifies the number of days in the year for calculating actual interest accrual. Default is Actual/365.|
|First payment due date||Number of days||Specifies the number of days after loan creation that the payment is due. This is typically set to 30 days to align with the customer’s billing cycle.|
|Number of payments||Minimum and maximum payment count||Specifies the number of days after loan creation that the payment is due. Specifies the minimum and maximum number of payments that the customer will make during the term of the loan.|