Waterfall Payment

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Definition: Waterfall Payment

Waterfall payment is a method of repayment where the people who have given the bigger loan will get paid at a higher priority over the people who have contributed slightly lesser. If an individual has given a higher loan, he/she will receive a substantially larger amount of repayment form the principal & interest as compared to someone who has given a lesser amount. 

This scenario arises when multiple loans have been taken for a business. If the loans are of different amounts, the larger amount would be repaid with a larger sum and proportionally, the smaller loans would be repaid in smaller amounts.

Waterfall payment is an important aspect to loan giving, as those having given a larger sum would be secure of receiving repayments in larger amounts. Once the largest loan is repaid, the loan of the second highest person / entity would be paid and henceforth. This process would continue until all the loans are cleared.

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