jaasaria,

In the design I provided, I had a transaction entity, which would include payments on the loan. The transaction entity has a foreign key to the Loan the transaction applied to.

As far as the loan-to-application relationship, when a person applies for a loan, they are either accepted or rejected. If they are rejected, then they fill out another application and try again. A person usually doesn't get to apply for more than one loan on a single application. Of course, the database can be designed to allow one application to several loans, but I'm not sure many places would allow that.