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The Fed encourages banks to loan more money by:
- Reducing the Cash Reserve Ratio (Money that needs to be deposited with the fed by every bank) This way banks have more cash to lend and hence they loan it to customers
- Reducing Interest Rates - By reducing interest rates, loans become cheaper thereby prompting customers to take new loans which encourages banks to lend more loans in order to gain new business
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How does charging interest encourage banks to make loans?
Interest is the money banks get in exchange for lending money. The more "safe" loans they make, the more money they make. This helps keep bank investors happy. A loan at 0% offers the bank zero incentive for lending money.
What do banks do with money not held in the federeal reserve?
They loan it out to others. Banks make more money through lending money than through storing it.
What do banks do with the money not held in reserve?
Loan it out to people, because they'll make more money by lending than by saving.
Difference in loan syndication and multiple banking?
multiple banking is use of more than one bank while loan syndication is where several banks lend the money for one loan.
Why do banks pay their customers interest on the money in their bank accounts?
Banks make money by loaning out money that has been deposited in the bank and charging interest on it. They are limited as to how much money they can loan by how much money has been deposited in the bank. To encourage people to deposit money in the bank they offer to pay some interest on the deposits. The interest paid on the deposits is less than what they charge people who borrow that money. For example: they might pay 1% annual interest on a deposit of $100,000 - which will cost them $1,000. While that money is on deposit, they loan out $80,000 of it at 5% interest - which makes them $4,000 - for a profit of $3,000. They interest they pay to their customers is an inducement for them to make deposits so that they have more money to loan out and thus can make more money.
How does charging interest encourage banks to make loans?
Interest is the money banks get in exchange for lending money. The more "safe" loans they make, the more money they make. This helps keep bank investors happy. A loan at 0% offers the bank zero incentive for lending money.
What do banks do with money not held in the federeal reserve?
They loan it out to others. Banks make more money through lending money than through storing it.
Do banks encourage you to make the maximum payment?
No. They want you to make the minimum payment, that way they can charge you more interest on your loan.
Why were banks often pressured to loan more money then what they should have?
Because that is just how things have to be sometimes.
What do banks do with the money not held in reserve?
Loan it out to people, because they'll make more money by lending than by saving.
What describes how lowering the required reserve ratio reduces the money supply?
When the required reserve ratio is lowered, banks can loan out more money.
Difference in loan syndication and multiple banking?
multiple banking is use of more than one bank while loan syndication is where several banks lend the money for one loan.
Why do banks pay their customers interest on the money in their bank accounts?
Banks make money by loaning out money that has been deposited in the bank and charging interest on it. They are limited as to how much money they can loan by how much money has been deposited in the bank. To encourage people to deposit money in the bank they offer to pay some interest on the deposits. The interest paid on the deposits is less than what they charge people who borrow that money. For example: they might pay 1% annual interest on a deposit of $100,000 - which will cost them $1,000. While that money is on deposit, they loan out $80,000 of it at 5% interest - which makes them $4,000 - for a profit of $3,000. They interest they pay to their customers is an inducement for them to make deposits so that they have more money to loan out and thus can make more money.
Is it possible that banks are not modifying your loan because they cant after selling your note and are lying to stall so they can foreclose instead of come clean?
The main reason why banks generally are not doing loan mods is because of money. Banks make more money by foreclosing on a property then by approving a loan mod . Also, banks have an obligation to their investors to get the most return on investments for their investors. A loan mod reduces the return on investment. Now if a bank sold the note and is offering a loan mod when they they are not the holder of the note in do course then they really have no authority to do so.
What is loan renewal?
a loan renewal is a loan you already have and you need more money so you renew the that loan for more money
A bank is a place that will lend you money if you can prove that you don't need it?
A bank will loan you money if you have a down payment and show proof that you can pay it back. A banks criteria for a loan became more strict after the collapse of the housing market.
How can a bank make money?
Banks make money off of the interest that comes from loans. When someone takes out a loan, he pays back more money than he borrowed. That money becomes the bank's profit.
