A Savings and Loan Association Could Be Your Alternative to Banks


If you are dissatisfied with big banks–perhaps the interest rates are low, loans are expensive or you’re just looking for friendlier and more personalized service –a savings and loan association may be perfect for you. S&Ls aren’t the same as banks and don’t always provide the same services, when one does offer the financial product you need, joining could result in huge benefits.

What is a Savings and Loan Association?

Savings and loan associations (S&Ls), as the name indicates, are financial institutions that specialize in offering customers savings accounts and mortgage loans. They are a type of thrift institution that can be state or federally chartered and federal S&Ls are overseen by the Office of Thrift Supervision (OTS).

Savings and loan associations are much like credit unions because they are very community-oriented–they are owned and operated by the people they exist to benefit. However, the primary purpose of an S&L is to promote growth of the local housing and construction community specifically.

Usually, these institutions are not-for-profits and members have voting rights and may direct the managerial goals of the institution. Even so, it is possible for an S&L to become stock-based and publicly traded in some cases, which means members are stockholders and lose managerial control.

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History of S&Ls

The first United States savings and loan association was created in 1831. Members of S&Ls joined with the intention of developing and investing in their communities, so the primary goal of S&Ls was to make mortgage and construction loans as affordable as possible.

However, after experiencing a financial crisis in the 1980s and ’90s that led to the failure of many S&Ls due to a rise in interest rates, they began offering a wider range of products and services beyond just home loans and high interest savings accounts. Nevertheless, these two offers remain the ultimate focus of these institutions.

How S&Ls Work

A person who deposits into an account at an S&L is essentially funding the mortgage loans and construction projects in the neighborhood. The money deposited in savings accounts is what is provided to the members who are borrowing from the institution. Borrowers then pay interest on these loans, which is then returned to the bank as revenue as well as the depositors in the form of dividends.

Benefits of a Savings & Loan Association

  • Higher deposit rates. Generally, savings and loan associations provide higher interest rates on accounts to encourage more deposits. In turn, this allows the S&L to make for funds available for borrowing.
  • Invests in the community. S&Ls are community-oriented financial institutions. When you open an account with one, you are helping your neighbors buy homes and make improvements to local housing.
  • Better customer service. Since savings and loan associations are smaller like credit unions, you can expect to receive a higher level of service and personal interest.

These days, savings and loan associations are becoming more like commercial banks, but still maintain a unique interest in savings and mortgages. Anyone who wishes to earn higher rates or is thinking about buying a home should consider becoming a member of an S&L.

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About the Author

Casey Bond

Casey Bond is seasoned editor and writer who has covered personal finance for more than a decade. Currently, she is a reporter for HuffPost covering money, home and living. Previously, she held editorial management roles at Student Loan Hero and GOBankingRates. Casey’s work has also appeared on Yahoo!, Business Insider, MSN, The Motley Fool, U.S. News & World Report, Forbes, TheStreet and more.

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