A loan association, also referred to as a savings-and-loan association or S&L, is a financial institution that specializes in providing home-mortgage loans and other banking services like checking accounts. Its main purpose is to assist individuals with limited resources and income in saving money and securing loans at advantageous interest rates. Loan associations have been established by various groups including social reformers, philanthropic donors, religious and fraternal organisations, trade unions, employers, and thrift entrepreneurs over the past 200 years.
A loan association, also referred to as a savings-and-loan association or S&L, is a financial institution that specializes in providing home-mortgage loans. It operates similarly to a bank and offers additional banking services like checking accounts. For instance, if you wish to purchase a house but lack the funds to pay for it upfront, you can approach a loan association for a mortgage loan. The association will lend you the necessary funds to buy the house, and you will repay it gradually with interest. Loan associations were established to cater to the needs of individuals with limited resources and income who were underserved by commercial banks, money lenders, and pawn shops. They were created by social reformers, philanthropists, religious and fraternal organisations, trade unions, employers, and thrift entrepreneurs as a form of collateral-based banking or financial intermediation.
No, loan associations must adhere to the legal interest rate limits set by the relevant regulatory authorities.
The requirements for starting a loan association vary by jurisdiction, but generally include obtaining the necessary licenses, meeting capitalization requirements, and complying with regulatory guidelines.
Yes, if a borrower defaults on their loan payments, a loan association may have the right to foreclose on the property used as collateral for the loan.
Yes, loan associations are legally obligated to provide borrowers with full disclosure of all fees and charges associated with the loan, including interest rates, origination fees, and any other applicable costs.
No, loan associations are prohibited from denying loan applications based on discriminatory factors such as race, gender, religion, or national origin. They must adhere to fair lending practices.
Generally, loan associations cannot unilaterally change the terms of a loan agreement without the borrower’s consent. Any changes to the terms should be mutually agreed upon and documented.
If a loan association goes bankrupt, its assets will be liquidated to repay its creditors. Borrowers may have their loans transferred to another financial institution or may be required to repay the outstanding balance to the bankruptcy trustee.
In some cases, loan associations may be able to obtain a court order to garnish wages to collect on a defaulted loan. However, specific laws regarding wage garnishment vary by jurisdiction.
Loan associations have the discretion to consider a borrower’s credit score when making lending decisions. However, they cannot solely rely on credit scores and must evaluate other factors such as income, employment history, and collateral.
Loan associations can be held liable for fraudulent activities committed by their employees if it can be proven that the association was negligent in hiring, training, or supervising the employee. However, the association may also have legal protections in place depending on the circumstances.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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