Richmond, Va.-based Shaw Systems Associates Inc. has upgraded its installment loan package to integrate withdrawals against a currently available line of credit and fixed loans.

This enhancement runs on Shaw's IL/2000 system and enables a bank to introduce a more flexible line of credit products. The IL/2000 software operates on International Business Machines Corp. mainframes.

With conventional installment loan programs, fixed-term loans and draws against a credit line are handled as separate entities so that neither can affect the other.

Adjusts Credit Information

With the Shaw upgrade, the customer may take out as many fixed-term loans as allowed by an available line of credit.

When the fixed-term loan is taken out, the line of available credit is reduced. As the fixed-term loan is paid back, the amount is automatically added to the available credit.

"This feature allows a bank to go through a single credit approval process, and gives the customer more control over their money," said Hickman Beckner, vice president at Shaw Associates.

According to William Westervelt, a principal at First Annapolis Consulting in Annapolis. Md., hybrid loans like these make sense for competitive reasons.

"Consumers have a lot of choices for getting loan products outside of bank. This is another way of selling traditional installment loans within the framework of unsecured debt," he said.

Shaw's Mr. Beckner said that many banks have begun to experiment with offering these kinds of loans but most have relied on homegrown systems.

One Shaw customer, a large regional bank he declined to name, already has the system up and running.

"For many banks, developing this service in-house involves a lot of tedious calculations and manual activity," he said. "The upgrade can do it automatically."

In addition, the system generates a multiple-page customer statement coordinating all the loan activity.

The first page provides the name of the loan. Additional pages detail the fixed-term loan disclosure information.

The final page summarizes total balances and due amounts.

Mr. Beckman said the upgrade is ideally suited to multi-branch banks or multibank holding companies because transaction reports can be generated by branch location or holding company.

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