diff --git a/app/controllers/application_controller.rb b/app/controllers/application_controller.rb
index 09705d1..3a4f8f8 100644
--- a/app/controllers/application_controller.rb
+++ b/app/controllers/application_controller.rb
@@ -1,2 +1,5 @@
-class ApplicationController < ActionController::Base
+class ApplicationController < ActionController::API
+  rescue_from ActiveRecord::RecordNotFound do |exception|
+    render json: 'not_found', status: :not_found
+  end
 end
diff --git a/app/controllers/loans_controller.rb b/app/controllers/loans_controller.rb
index ec98cfa..821c67a 100644
--- a/app/controllers/loans_controller.rb
+++ b/app/controllers/loans_controller.rb
@@ -1,14 +1,10 @@
-class LoansController < ActionController::API
-
-  rescue_from ActiveRecord::RecordNotFound do |exception|
-    render json: 'not_found', status: :not_found
-  end
+class LoansController < ApplicationController
 
   def index
-    render json: Loan.all
+    render json: Loan.all.as_json(methods: :outstanding_balance)
   end
 
   def show
-    render json: Loan.find(params[:id])
+    render json: Loan.find(params[:id]).as_json(methods: :outstanding_balance)
   end
 end
diff --git a/app/controllers/payments_controller.rb b/app/controllers/payments_controller.rb
new file mode 100644
index 0000000..84fa5c5
--- /dev/null
+++ b/app/controllers/payments_controller.rb
@@ -0,0 +1,26 @@
+class PaymentsController < ApplicationController
+  def index
+    render json: Loan.find(params[:loan_id]).payments
+  end
+
+  def show
+    render json: Loan.find(params[:loan_id]).payments.find(params[:id])
+  end
+
+  def create
+    loan = Loan.find(params[:loan_id])
+    payment = loan.payments.build(payment_params)
+
+    if payment.save
+      render json: payment, status: :created
+    else
+      render json: payment.errors, status: :unprocessable_entity
+    end
+  end
+
+  private
+
+  def payment_params
+    params.require(:payment).permit(:date, :amount)
+  end
+end
diff --git a/app/models/loan.rb b/app/models/loan.rb
index aa46eda..9da78c0 100644
--- a/app/models/loan.rb
+++ b/app/models/loan.rb
@@ -1,2 +1,7 @@
 class Loan < ActiveRecord::Base
+  has_many :payments
+
+  def outstanding_balance
+    funded_amount - payments.sum(:amount)
+  end
 end
diff --git a/app/models/payment.rb b/app/models/payment.rb
new file mode 100644
index 0000000..84e6f1b
--- /dev/null
+++ b/app/models/payment.rb
@@ -0,0 +1,18 @@
+class Payment < ActiveRecord::Base
+  belongs_to :loan
+
+  before_create :validate_and_create_payment
+
+  private
+
+  def validate_and_create_payment
+    ActiveRecord::Base.transaction do
+      loan.with_lock do
+        if amount > loan.outstanding_balance
+          errors.add(:amount, "Payment amount exceeds loan balance")
+          throw :abort
+        end
+      end
+    end
+  end
+end
diff --git a/config/routes.rb b/config/routes.rb
index 89db866..27041a1 100644
--- a/config/routes.rb
+++ b/config/routes.rb
@@ -1,3 +1,5 @@
 Rails.application.routes.draw do
-  resources :loans, defaults: {format: :json}
+  resources :loans, defaults: {format: :json}, only: [:index, :show] do
+    resources :payments, defaults: {format: :json}, only: [:index, :show, :create]
+  end
 end
diff --git a/db/migrate/20250226204247_create_payments.rb b/db/migrate/20250226204247_create_payments.rb
new file mode 100644
index 0000000..9d96b2b
--- /dev/null
+++ b/db/migrate/20250226204247_create_payments.rb
@@ -0,0 +1,11 @@
+class CreatePayments < ActiveRecord::Migration[5.2]
+  def change
+    create_table :payments do |t|
+      t.references :loan, foreign_key: true
+      t.date :date
+      t.decimal :amount, precision: 8, scale: 2
+
+      t.timestamps
+    end
+  end
+end
diff --git a/db/schema.rb b/db/schema.rb
index 3b0f090..40202b2 100644
--- a/db/schema.rb
+++ b/db/schema.rb
@@ -10,7 +10,7 @@
 #
 # It's strongly recommended that you check this file into your version control system.
 
-ActiveRecord::Schema.define(version: 20150903195334) do
+ActiveRecord::Schema.define(version: 2025_02_26_204247) do
 
   create_table "loans", force: :cascade do |t|
     t.decimal "funded_amount", precision: 8, scale: 2
@@ -18,4 +18,13 @@
     t.datetime "updated_at", null: false
   end
 
+  create_table "payments", force: :cascade do |t|
+    t.integer "loan_id"
+    t.date "date"
+    t.decimal "amount", precision: 8, scale: 2
+    t.datetime "created_at", null: false
+    t.datetime "updated_at", null: false
+    t.index ["loan_id"], name: "index_payments_on_loan_id"
+  end
+
 end
diff --git a/spec/controllers/loans_controller_spec.rb b/spec/controllers/loans_controller_spec.rb
index 312463a..6b63fa3 100644
--- a/spec/controllers/loans_controller_spec.rb
+++ b/spec/controllers/loans_controller_spec.rb
@@ -1,21 +1,34 @@
 require 'rails_helper'
 
 RSpec.describe LoansController, type: :controller do
+  let(:loan) { Loan.create!(funded_amount: 100.0) }
+
   describe '#index' do
     it 'responds with a 200' do
       get :index
       expect(response).to have_http_status(:ok)
     end
+
+    it 'includes oustanding balance in the response' do
+      loan # create loan
+      get :index
+      json_response = JSON.parse(response.body)
+      expect(json_response.first['outstanding_balance'].to_f).to be 100.0
+    end
   end
 
   describe '#show' do
-    let(:loan) { Loan.create!(funded_amount: 100.0) }
-
     it 'responds with a 200' do
       get :show, params: { id: loan.id }
       expect(response).to have_http_status(:ok)
     end
 
+    it 'includes oustanding balance in the response' do
+      get :show, params: { id: loan.id }
+      json_response = JSON.parse(response.body)
+      expect(json_response['outstanding_balance'].to_f).to be 100.0
+    end
+
     context 'if the loan is not found' do
       it 'responds with a 404' do
         get :show, params: { id: 10000 }
diff --git a/spec/controllers/payments_controller_spec.rb b/spec/controllers/payments_controller_spec.rb
new file mode 100644
index 0000000..bc06674
--- /dev/null
+++ b/spec/controllers/payments_controller_spec.rb
@@ -0,0 +1,48 @@
+require 'rails_helper'
+
+RSpec.describe PaymentsController, type: :controller do
+  let(:loan) { Loan.create!(funded_amount: 100.0) }
+  let(:payment) { Payment.create!(loan: loan, date: Date.today, amount: 100.00) }
+
+  describe "#index" do
+    it "returns http success with payments" do
+      payment
+      get :index, params: { loan_id: loan.id }
+      expect(response).to have_http_status(:success)
+      expect(response.body).to include("100.0")
+    end
+
+    context "when loan is not found" do
+      it "returns http not found" do
+        get :index, params: { loan_id: 10000 }
+        expect(response).to have_http_status(:not_found)
+      end
+    end
+  end
+
+  describe "#show" do
+    it "returns http success with payment details" do
+      payment
+      get :show, params: { loan_id: loan.id, id: payment.id }
+      expect(response).to have_http_status(:success)
+      expect(response.body).to include("100.0")
+    end
+  end
+
+  describe "#create" do
+    it "add payment & returns http success" do
+      expect do
+        post :create, params: { loan_id: loan.id, payment: { date: Date.today, amount: 100.00 } }
+        expect(response).to have_http_status(:success)
+      end.to change { loan.payments.count }.by(1)
+    end
+
+    it "returns http unprocessable_entity when payment exeeds loan balance" do
+      expect do
+        post :create, params: { loan_id: loan.id, payment: { date: Date.today, amount: 1000.00 } }
+        expect(response).to have_http_status(:unprocessable_entity)
+        expect(response.body).to include("Payment amount exceeds loan balance")
+      end.to_not change { loan.payments.count }
+    end
+  end
+end
diff --git a/spec/models/payment_spec.rb b/spec/models/payment_spec.rb
new file mode 100644
index 0000000..035a74e
--- /dev/null
+++ b/spec/models/payment_spec.rb
@@ -0,0 +1,20 @@
+require 'rails_helper'
+
+RSpec.describe Payment, type: :model do
+  let(:loan) { Loan.create!(funded_amount: 100.0) }
+
+  it "is thread-safe" do
+    payment1 = Payment.new(loan: loan, date: Date.today, amount: 60.0)
+    payment2 = Payment.new(loan: loan, date: Date.today, amount: 60.0)
+
+    thread1 = Thread.new { payment1.save }
+    thread2 = Thread.new { payment2.save }
+
+    thread1.join
+    thread2.join
+
+    loan.reload
+    expect(loan.outstanding_balance).to eq(40.0)
+    expect(loan.payments.count).to eq(1)
+  end
+end