Banks originated as an alternative to burying your money in a clay
pot out in the sheepfold. In most ancient records, the concept of a
bank as anything other than a communal effort to protect wealth
from raiders is spotty.

But the person who came up with the idea of a bank loan - or a bank
that loans out money to people for an interest charge, can be
credited with the most important inventions of all time.

The practice of taking deposits and lending money is the bread and
butter business of banking. It’s estimated that the number of bank
loans (including credit card debt) exceeds the number of deposit
accounts by a factor of three worldwide.

The practice of charging interest is what makes banks work. A lot
of people’s first encounter with a bank is with a savings deposit
book; their second is with a some sort of loan, and this proves to
be the tie that binds.

In fact, my first loan was for the purchase of my first new car.
After this, I took a home mortgage loan to purchase a condo.

Nobody in the present day and age (unless they are born to money)
has enough money lying around to make big ticket purchases like a
condo or house, without having to resort to a bank loan.

These mortgages are usually made with low interest and long
repayment terms (it works out nicely for both parties that way),
with payment terms that run for 10 to 30 years depending on the
loan.

There are also other types of bank loans issued for various
purposes. A personal bank loan will enable you to buy a broad
spectrum of goods or services. This sort of bank loan will come in
handy for repairs, renovations, marriages, celebrations, events or
any other expenses that you don’t have cash lying around for.

And then of course, there are student bank loans. There are bank
loans that will help you buy a car. And again, there are bank loans
that will help you buy computers, washing machines and other
consumer goods.

Yes, even a credit card is a bank loan, and is one of the reasons
why our society is so mired in debt. This trend for unsecured debt
has shown up in other ways with debt consolidation loans - taking
out a loan to pay off other loans at higher interest rates or
higher monthly payments is a thriving business.

Bank loans issued to individuals for the purpose of housing are
probably the vast majority of loans issued by banks. But they may
not compare in volume or value to bank loans issued to businesses
worldwide.

Most businesses rely on having short term credit terms to make
shortfalls in payroll, slow sales periods, or capital investments.
More than 99.99% of all lending is made by banks to businesses.
This is why investment banks got a bailout and you didn’t. If those
loans dry up

Without business loans and credit, the vast majority of businesses
would collapse. This business loan mentality is what drives the
modern financial world.

Technorati Tags: college loans

Sponsors:

This entry was posted on Tuesday, May 26th, 2009 at 3:29 am and is
filed under college loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.