How a Bank Handles Loan Accounts

Posted by financer | June 15, 2010 .

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Early bankers, who kept money belonging to others for safekeeping, would lend the money and charge interest for its use depending on the time used, just as we do today.

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There was a country side banker who despite competitions decided to run the financial institution in different way. The banking rule is, “you will lend at the highest rate you can get, at the lowest risk you can take.” This rule is basic for all banking institutions in the world.

The banker focused on generating deposits from all walks of life. Although there were depositors who pulled-out their money to be placed to another financial institution for a higher interest rate, there were immediate replacements so the business continues. The depositors money are loaned to low and middle income groups who need financial assistance at a very reasonable rate than what other banks offer.

He was once questioned why he was offering low interest rate in lending. His response was, he wanted to help the middle and lower income groups. Lending them the money at higher rate will lead them to more of economic distress due to difficulty in paying back.

The bank also has existing delinquent accounts but based on record, they have the lowest percentage of foreclosed accounts compared to competition. This means that the debtors are continuously paying. According to the banker loan applicants must understand that by providing them loans, they are given the chance to make a new start in life. But they must learn from past mistakes caused by bankruptcy, foreclosure of assets, or due to lack of understanding and discipline in paying their debts. They need counseling in terms of budgeting.

Based on the old teachings of basic budgeting principle, your 100% income should be allocated as follows: 10% of income to church and community service, 10% to serve as personal savings and the remaining 80% will take care of paying all the bills. If however, the person already has debts in excess of 100% of take home pay or income, belt tightening must be done. Get additional work and make necessary sacrifices to bring all obligations to its proper level.