Savings and Loan Association
What Is a Savings and Loan Association?
A Savings and Loan Association (S&L) is a type of financial institution that primarily focuses on accepting savings deposits and providing home mortgage loans. These institutions were originally created to encourage homeownership by helping individuals save money and borrow funds to purchase homes.
Savings and loan associations are sometimes referred to as thrift institutions.
Why It Matters
Savings and loan associations have historically played an important role in expanding access to home financing. By focusing on residential mortgage lending, they help support housing markets and make homeownership more accessible to communities.
Although many S&Ls have evolved or merged into larger banks, they remain part of the broader financial system.
How Savings and Loan Associations Work
Savings and loan associations operate similarly to banks but traditionally focus on mortgage lending and savings accounts.
They typically provide services such as:
- savings accounts and certificates of deposit (CDs)
- home mortgage loans
- refinancing and home equity loans
- basic consumer banking services
Deposits collected from customers help fund mortgage loans issued to borrowers.
Example
A family depositing money in a savings account at a local thrift institution helps provide the funds that another customer uses to finance a home mortgage.
Savings and Loan Association vs Bank
Savings and loan associations traditionally specialize in home mortgage lending and savings deposits.
Banks offer a broader range of financial services including business lending, investment products, and commercial banking.
FAQs About Savings and Loan Associations
Are savings and loan associations the same as banks?
They are similar but historically focused more on mortgage lending and savings deposits.
Are deposits in savings and loan associations insured?
Yes. Deposits are typically insured by the Federal Deposit Insurance Corporation (FDIC).
Do savings and loan associations still exist today?
Yes, although many have merged with larger banks over time.
Related Terms
