Getting short term loans: Are there any lenders

Getting short term loans: Are there any lenders

Short term loans are a great help

Short term loans are a perfect way to pay your bills and for any other emergency situation provided they are approved easily. This way you will never fall behind. Martha, a teacher by profession very often finds it hard to meet expenses especially until payday. Recently she faced a medical emergency at home. Martha said, “I was in a fix and I had no clue what to do when my son fell ill a couple of months ago. The doctor said that my son needs to be hospitalized. I then borrowed a short term loan which enabled me to provide suitable treatment to my son.” Sam of Washington said, “I am thinking of borrowing a short term loan to pay for my grocery bills which are pending since past three months. Complaining about rising prices and finding it difficult to meet both ends is common for Americans but ultimately, we have no escape but to pay for various utilities.”

What banks say about lending

Though some banks are lending money as requested by Obama administration, there are still some like Heritage Bank which is not lending money as it should. The bank’s president Wilmoth said that the lending guidelines of his bank have not changed in the last five years and that the number of qualified borrowers has reduced. He also said that since demand for loans is low, his bank has to make money some way or the other. Tom Brown, head of New York hedge fund Second Curve Capital said that the remedy is same as it was in the early 90s i.e. making money on investment securities to make up for losses. Moody’s Investors Service has estimated that losses due to loan defaulters will reach $536 billion from 2008 through 2010. Till now only 40 percent of the losses have been calculated and a significant portion of it will be revealed soon.

Banks investing in securities

Many banks are investing in securities, such as government bonds and nor lending short term loans or any other sort of loans as such. Holdings of securities were $2.4 trillion at U.S. banks in September i.e. 18 percent higher in a year, according to the FDIC. However, banks are waiting for borrowers with a good credit history. This is because a significant number of borrowers defaulted on their loans post 2008 recession.

The banks must however understand that less availability of loans will hinder the economy further along with banks’ profitability. Talking of banks, they definitely want to lend as loans yield them higher profits than securities provided the borrowers are able to pay back. Devising new loans will help banks to recover old losses incurred due to defaulters. Recently, the US government came to the rescue of financial institutions through its Troubled Asset Relief Program. Now when situation is under control, the government’s money will be diverted back to the US Treasury.

Every Cloud Has a Silver Lining

The bank interest rates that have gone down post recession are more likely to benefit borrowers in the coming year. The only hassle is that banks are not ready to lend extensively like before. However, borrowers must get a sigh of relief to know that with more loans related regulations, loan approval process has become quite fair. Even though banks are reluctant to lend short term loans, it is believed that the current loan situation will soon improve due to steps taken by Obama’s government.

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