Design a loan application system

Q: Design a loan application system

This is a System Design interview question from Parafin for Software Engineer roles. View the full question and solution on PracHub.

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Question

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:

High-level architecture
- Service boundaries and core data models
- Public/internal APIs and webhooks
- Eventing/queues/workflows and an application state machine
Decisioning and post-decision flows
- Approval/denial paths
- Post-decision actions including funds disbursement/transfer
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

Design a loan application system

System Design: End-to-End Online Loan Application Platform

Context

Requirements

Solution (Locked)

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