Design a loan application system
Overview
This System Design question evaluates a candidate's ability to architect a distributed loan application platform, testing competencies in service boundary definition, data modeling, API and webhook design, event-driven workflows, third-party integrations, security/compliance (KYC/AML, PII protection), and operational engineering concerns like idempotency, retries, observability, and scalability. It is commonly asked to assess architectural thinking and trade-off analysis for real-world constraints such as reliability, compliance, and growth, and it tests both conceptual system-level understanding and practical application of operational and integration patterns.
System Design: End-to-End Online Loan Application Platform
Context
Design a small online lending platform where applicants select loan products and submit applications. The platform performs internal review/underwriting and integrates with third-party providers to fetch credit history and bank-account transaction data.
Assume a web/mobile client, US-based compliance (KYC/AML), ACH bank disbursement via a payment/fintech provider, and standard third-party vendors (e.g., credit bureau, bank aggregation, identity/AML).
Requirements
Describe the following:
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High-level architecture
- Service boundaries and core data models
- Public/internal APIs and webhooks
- Eventing/queues/workflows and an application state machine
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Decisioning and post-decision flows
- Approval/denial paths
- Post-decision actions including funds disbursement/transfer
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Operational concerns
- Idempotency, retries, timeouts, rate limiting, partial failures with external APIs
- KYC/AML and fraud checks implementation approach
- PII protection and compliance/audit support
- Manual review tooling
- Observability, scalability, and backpressure under growth
- Compare synchronous vs asynchronous processing and justify trade-offs
Solution
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