Short term loans are known by many names. The history of the loan types goes back to the 8th century. The process of availing money from reliable sources and returning the amount before or on the promised date is in practice from the time money or currency was introduced to the world.
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Hawala – An Ancient Money Transferring Service
The first service when the amount was borrowed or even transferred from one person to another is known as Hawala. This process was actually introduced to the world by the Muslims and Arabs. There was no requirement of exchanging any goods or assets as surety between the money lender and receiver in this case. All transactions were made between two people based on the trust and honour that they share.
Normally, two persons would be involved in the Hawala transactions. The money lender would hand over the amount to the broker A who would then give away the money to the broker B. The broker B would then finally hand over the amount to the consumer.
While returning the amount, the process would take place in the same steps and the money receiver would hand over the money to broker B. The broker B would give the amount to broker A, and the broker A would finally give the borrowed amount to the lender.
During the 10th century, temples would act as the banks for the wealthy people. The wealthy people residing in the nearby locality of a temple would store away their valuable belongings such as gold, silver and other such precious metals and the gold and silver coins with the priests.
Thieves and robbers wouldn’t dare to enter the temple and steal the belongings of the wealthy people, as the act would be considered as a step against God’s wills. Sometimes, the people in need would borrow currencies from the priests with a promise to return the amount within the promised time duration.
Evolution of Payday Loans through Time
During the 1900s, people would take help from the people such as pawnbrokers to get some amount as a loan. The people in need of money would mortgage the valuable possessions with the pawnbrokers for some time, in order to avail some amount. The borrower would pay back the amount loaned and would get their valuables back.
If the money borrower failed to return the amount in time, then the pawnbrokers would keep the valuable items belonging to that particular person, in return for the money lent. The pawnbrokers would either sell the mortgaged valuable belonging to the borrower or would auction it for certain amounts, in order to avail the money lent.
Money borrowing and returning process dates back to the 10th century and is in the habit since then. You can take help from such lenders, when in need.