Savings and Loans

Lenders in Australia have become more diligent about providing loans to home buyers.  Today, new home buyers must demonstrate their ability to generate savings.  This means showing the bank or other financial services organisation that you really can save over time.

The measures are designed to reduce loan defaults and to minimize the negative impact to home buyers of over committing.  It was once too easy to get a loan (little or no deposit and no proven savings plan over time).  So banks and other lending institutions have initiated stronger credit risk policies, one of which is demonstrated ability to save.

When you think about this it all makes sense.  If a bank were to lend money purely based on equity, they might sell more loans but could find themselves dealing with higher numbers of defaults.  In today’s society where social media and other communication devices enable customers to view their opinions easily and widely, reputations are at stake.

Financial Institutions Of Different Types

There is a type of financial institution known as a “savings and loan”.  They are also known as a thrift.  Their main business is to lend money for customers to acqire property whilst also providing interest bearing savings and deposit accounts.  The incentive is to encourage customers to be thrifty with their money.

Historically, these organizations were set up to help promote lower classes to higher levels of wealth by encouraging responsibility and care with money.  This form of banking was very quickly adopted and spread all over the world. One business model was to establish member based organizations that paid dividends to shareholders or members.  Others were set up a commercial entities and compete with one another for business.

This type of banking, savings and loans organisation prevails today.  In Australia we see a range of business models like commercial banks, retail banks, regional based financial institutions and community based organizations’.  All play an important role in the financial system and the economy of the country.

If you have spent your time reading this, I am amazed.  It was put together very quickly to keep this web site alive.  I will be changing it shortly to something more substantial.