diff --git a/fineract-provider/src/main/java/org/apache/fineract/portfolio/loanproduct/serialization/LoanProductDataValidator.java b/fineract-provider/src/main/java/org/apache/fineract/portfolio/loanproduct/serialization/LoanProductDataValidator.java
index 9fbd578f1..8bcee6782 100644
--- a/fineract-provider/src/main/java/org/apache/fineract/portfolio/loanproduct/serialization/LoanProductDataValidator.java
+++ b/fineract-provider/src/main/java/org/apache/fineract/portfolio/loanproduct/serialization/LoanProductDataValidator.java
@@ -794,19 +794,8 @@ public final class LoanProductDataValidator {
             }
         }
 
-        String loanScheduleType = LoanScheduleType.CUMULATIVE.name();
         if (this.fromApiJsonHelper.parameterExists(LoanProductConstants.LOAN_SCHEDULE_TYPE, element)) {
-            loanScheduleType = this.fromApiJsonHelper.extractStringNamed(LoanProductConstants.LOAN_SCHEDULE_TYPE, element);
-            baseDataValidator.reset().parameter(LoanProductConstants.LOAN_SCHEDULE_TYPE).value(loanScheduleType)
-                    .isOneOfEnumValues(LoanScheduleType.class);
-        }
-
-        if (!LoanScheduleType.PROGRESSIVE.equals(LoanScheduleType.valueOf(loanScheduleType))
-                && AdvancedPaymentScheduleTransactionProcessor.ADVANCED_PAYMENT_ALLOCATION_STRATEGY
-                        .equals(transactionProcessingStrategyCode)) {
-            baseDataValidator.reset().parameter(LoanProductConstants.LOAN_SCHEDULE_PROCESSING_TYPE).failWithCode(
-                    "supported.only.for.progressive.loan.schedule.type",
-                    "Progressive repayment schedule processing is only available with `Advanced payment allocation` strategy");
+            validateLoanScheduleType(transactionProcessingStrategyCode, baseDataValidator, element);
         }
 
         String loanScheduleProcessingType = LoanScheduleProcessingType.HORIZONTAL.name();
@@ -1786,19 +1775,8 @@ public final class LoanProductDataValidator {
             }
         }
 
-        String loanScheduleType = loanProduct.getLoanProductRelatedDetail().getLoanScheduleType().name();
         if (this.fromApiJsonHelper.parameterExists(LoanProductConstants.LOAN_SCHEDULE_TYPE, element)) {
-            loanScheduleType = this.fromApiJsonHelper.extractStringNamed(LoanProductConstants.LOAN_SCHEDULE_TYPE, element);
-            baseDataValidator.reset().parameter(LoanProductConstants.LOAN_SCHEDULE_TYPE).value(loanScheduleType)
-                    .isOneOfEnumValues(LoanScheduleType.class);
-
-            if (!LoanScheduleType.PROGRESSIVE.equals(LoanScheduleType.valueOf(loanScheduleType))
-                    && AdvancedPaymentScheduleTransactionProcessor.ADVANCED_PAYMENT_ALLOCATION_STRATEGY
-                            .equals(transactionProcessingStrategyCode)) {
-                baseDataValidator.reset().parameter(LoanProductConstants.LOAN_SCHEDULE_PROCESSING_TYPE).failWithCode(
-                        "supported.only.for.progressive.loan.schedule.type",
-                        "Progressive repayment schedule processing is only available with `Advanced payment allocation` strategy");
-            }
+            validateLoanScheduleType(transactionProcessingStrategyCode, baseDataValidator, element);
         }
 
         String loanScheduleProcessingType = loanProduct.getLoanProductRelatedDetail().getLoanScheduleProcessingType().name();
@@ -2463,4 +2441,28 @@ public final class LoanProductDataValidator {
             }
         }
     }
+
+    private void validateLoanScheduleType(final String transactionProcessingStrategyCode, final DataValidatorBuilder baseDataValidator,
+            final JsonElement element) {
+        final String loanScheduleType = this.fromApiJsonHelper.extractStringNamed(LoanProductConstants.LOAN_SCHEDULE_TYPE, element);
+        baseDataValidator.reset().parameter(LoanProductConstants.LOAN_SCHEDULE_TYPE).value(loanScheduleType)
+                .isOneOfEnumValues(LoanScheduleType.class);
+
+        if (!LoanScheduleType.PROGRESSIVE.equals(LoanScheduleType.valueOf(loanScheduleType))
+                && AdvancedPaymentScheduleTransactionProcessor.ADVANCED_PAYMENT_ALLOCATION_STRATEGY
+                        .equals(transactionProcessingStrategyCode)) {
+            baseDataValidator.reset().parameter(LoanProductConstants.LOAN_SCHEDULE_PROCESSING_TYPE).failWithCode(
+                    "supported.only.for.progressive.loan.schedule.type",
+                    "Progressive repayment schedule processing is only available with `Advanced payment allocation` strategy");
+        }
+
+        if (LoanScheduleType.PROGRESSIVE.equals(LoanScheduleType.valueOf(loanScheduleType))
+                && !AdvancedPaymentScheduleTransactionProcessor.ADVANCED_PAYMENT_ALLOCATION_STRATEGY
+                        .equals(transactionProcessingStrategyCode)) {
+            baseDataValidator.reset().parameter(LoanProductConstants.LOAN_SCHEDULE_TYPE).failWithCode(
+                    "supported.only.with.advanced.payment.allocation.strategy",
+                    loanScheduleType + " loan schedule type is not available with " + transactionProcessingStrategyCode + " strategy");
+        }
+    }
+
 }
diff --git a/integration-tests/src/test/java/org/apache/fineract/integrationtests/AdvancedPaymentAllocationLoanRepaymentScheduleTest.java b/integration-tests/src/test/java/org/apache/fineract/integrationtests/AdvancedPaymentAllocationLoanRepaymentScheduleTest.java
index c76f54b10..6f49446c0 100644
--- a/integration-tests/src/test/java/org/apache/fineract/integrationtests/AdvancedPaymentAllocationLoanRepaymentScheduleTest.java
+++ b/integration-tests/src/test/java/org/apache/fineract/integrationtests/AdvancedPaymentAllocationLoanRepaymentScheduleTest.java
@@ -4069,6 +4069,43 @@ public class AdvancedPaymentAllocationLoanRepaymentScheduleTest extends BaseLoan
         });
     }
 
+    // UC137: Loan Progressive processing type only with Advanced payment allocation
+    // ADVANCED_PAYMENT_ALLOCATION_STRATEGY
+    // 1. Create a Loan product, Loan Progressive type and other transaction processing strategy code
+    // different than advanced-payment-allocation-strategy
+    // - > Expect validation error
+    @Test
+    public void uc137() {
+        runAt("22 February 2023", () -> {
+
+            final Account assetAccount = accountHelper.createAssetAccount();
+            final Account incomeAccount = accountHelper.createIncomeAccount();
+            final Account expenseAccount = accountHelper.createExpenseAccount();
+            final Account overpaymentAccount = accountHelper.createLiabilityAccount();
+            AdvancedPaymentData defaultPaymentAllocation = createDefaultPaymentAllocationWithMixedGrouping();
+
+            // First scenario (Legacy): Loan product no Advanced Payment Allocation and Cumulative Loan Schedule type
+            PostLoanProductsResponse loanProductResponse = loanProductHelper.createLoanProduct(
+                    createOnePeriod30DaysLongNoInterestPeriodicAccrualProduct().loanScheduleType(LoanScheduleType.CUMULATIVE.toString()));
+            assertNotNull(loanProductResponse.getResourceId());
+
+            // Second scenario: Loan product with Advanced Payment Allocation and Progressive Loan Schedule type
+            loanProductResponse = loanProductHelper
+                    .createLoanProduct(createOnePeriod30DaysLongNoInterestPeriodicAccrualProductWithAdvancedPaymentAllocation()
+                            .loanScheduleType(LoanScheduleType.PROGRESSIVE.toString()));
+            assertNotNull(loanProductResponse.getResourceId());
+
+            // Third scenario: Loan product no Advanced Payment Allocation and Progressive Loan Schedule type,
+            // validation expected
+            CallFailedRuntimeException exception = assertThrows(CallFailedRuntimeException.class,
+                    () -> loanProductHelper.createLoanProduct(createOnePeriod30DaysLongNoInterestPeriodicAccrualProduct()
+                            .loanScheduleType(LoanScheduleType.PROGRESSIVE.toString()) //
+                            .loanScheduleProcessingType(LoanScheduleProcessingType.HORIZONTAL.toString())));
+            assertEquals(400, exception.getResponse().code());
+            assertTrue(exception.getMessage().contains("supported.only.with.advanced.payment.allocation.strategy"));
+        });
+    }
+
     private void createLoanForRoundingMethodValidation(boolean isHalfDown) {
         LOG.info("------------------------------ROUNDING HALF DOWN {} ---------------------------------------", isHalfDown);
 
diff --git a/integration-tests/src/test/java/org/apache/fineract/integrationtests/LoanProductWithCreditAllocationsIntegrationTests.java b/integration-tests/src/test/java/org/apache/fineract/integrationtests/LoanProductWithCreditAllocationsIntegrationTests.java
index aca226fb7..1c7182d85 100644
--- a/integration-tests/src/test/java/org/apache/fineract/integrationtests/LoanProductWithCreditAllocationsIntegrationTests.java
+++ b/integration-tests/src/test/java/org/apache/fineract/integrationtests/LoanProductWithCreditAllocationsIntegrationTests.java
@@ -182,7 +182,7 @@ public class LoanProductWithCreditAllocationsIntegrationTests {
     public void testCreditAllocationIsNotAllowedWhenPaymentStrategyIsNotAdvancedPaymentStrategy() {
         // given
         String loanProductJSON = baseLoanProduct().withRepaymentStrategy("mifos-standard-strategy")
-                .addCreditAllocations(createChargebackAllocation()).build();
+                .withLoanScheduleType(LoanScheduleType.CUMULATIVE).addCreditAllocations(createChargebackAllocation()).build();
         ResponseSpecification errorResponse = new ResponseSpecBuilder().expectStatusCode(400).build();
         LoanTransactionHelper validationErrorHelper = new LoanTransactionHelper(REQUEST_SPEC, errorResponse);