Types Bank Loan Money Institution Interest Credit People

In the United States, there are many different kinds of banks. A traditional bank is a "for-profit" (wanting to make money) institution that exists to loan money to individuals and businesses, so that it can "profit" (make money) on the interest they have to pay back to the bank.

A "credit union" does many of the same things that banks do, but it is owned and controlled by its members. Credit unions are open to only certain types of people - like public school teachers in a certain county, or anyone who lives in a particular state. Credit unions try to "promote" (encourage) "thrift" (the act of saving money), offer "credit" (loans) at "reasonable" (not too high) interest rates, and provide other types of financial services to their members.

A "savings and loan association," also called an "S&L," is a financial institution that gives people a place to keep their savings. An S&L uses that money to make "mortgages" (loans to buy a home) and other types of loans. Some S&Ls are owned and operated by the "depositors" (people who put their savings in the S&L) and "borrowers" (people who get a loan from the S&L), but other S&Ls are "publicly traded" (with many people buying and selling small pieces of ownership). The law requires that at least 65% of the money lent by S&Ls be used for mortgages and other "consumer loans" (money used by individuals to buy things; not for businesses).

When opening a new bank account or applying for a loan in the United States, it is important to research your options at traditional banks, credit unions, and S&Ls, because the interest rates offered by each institution can "vary greatly" (be very different).