In
finance, a loan is a debt
evidenced by a note which specifies, among other things, the principal amount,
interest rate, and date of repayment. A loan entails the reallocation of the
subject assets for a period of time, between the lender and the borrower.
In
a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time.
Typically, the money is paid back in regular installments, or partial repayments, each installment is the
same amount.
The
loan is generally provided at a cost, referred to as interest on the debt,
which provides an incentive for the lender to engage in the loan. In a legal
loan, each of these obligations and restrictions is enforced by contract, which
can also place the borrower under additional restrictions known as loan
covenants. Although this article focuses on monetary loans, in practice any
material object might be lent.
A
payday loan is a small,
short-term unsecured loan, regardless of whether repayment of loans is linked
to a borrower's payday. This term can also refer to cash provided against a
prearranged line of credit such as a credit card. The basic loan process
involves a lender providing a short-term unsecured loan to be repaid at the
borrower's next payday. Typically, some verification of employment or income is
involved, although according to one source, some payday lenders do not verify
income or run credit checks. Individual companies and franchises have their own
underwriting criteria.
One
of my friend who is a salaried person who has to wait for month for the salary,
wanted to buy a golden watch for her wife as a birthday gift for her. He was
saving money for this from last four months. But due to some reasons he was not
getting money on the expected date. Now he was in problem. Then he took a
payday loan and with his saved salary amount and with the loan amount he
becomes able to buy that golden watch. So in this situation when we are in
urgent need and we can return loan amount within few days payday loan helps us
truly.
Many
people who use payday loans are low-to-middle income people with few assets.
These individuals are least able to secure normal, lower-interest-rate forms of
credit. Since payday lending operations charge higher interest-rates than
traditional banks, they have the effect of depleting the assets of low-income
communities.
