Overnight Loans
Tuesday, April 5, 2011
In the New York currency market, a special type of extremely short-term credit accommodation for traders in securities has been provided in the form of overnight loans. These traders mostly include government securities traders and those dealing in over-the-counter securities. The overnight loan offers credit for such traders by which they can pay off any day loans. They may have incurred such loans in order to pay for securities against delivery or to obtain release from pledge of securities in order to deliver.
Overnight loans, like day loans, are verified by specific notes for specific amounts. Overnight loans are fully guaranteed by securities placed in possession of the bank lender, while day loans are secured by lien on securities in the process of being received or delivered. In addition, overnight loans are subject to maximum loan values and varying interest rates like other security loans, whereas interest rates on day loans are flat and these loans are not subject to margin requirements.
Overnight loans can also be in the form of payday loans. Payday loans are small, unsecured interim loans available to meet minor cash needs. These payday loans are intended to assist people to acquire funds between paydays. Many people prefer payday loans to meet unanticipated expenses. These loans require borrowers to meet minimum requirements and hence are more or less guaranteed. Once, borrowers submit their applications, lenders will review it and if the eligibility criteria are met, the loan is approved. When the lending institutions are certain of the identity of borrowers, they electronically deposit cash directly into their bank account overnight. In most cases, borrowers are able to access it on the following business day. Once borrowers get their next paycheck, the lending institutions simply withdraw the amount borrowed, plus their minimal fee, from the account. Hence, overnight payday loans are obtainable in small denominations.
