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What Banks Do Not Want You to Know

Joseph M Sabol

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Here is something the banks DO NOT want you to know. First of all I would hope that everyone knows what the federal reserve is and what the Fed Rates are. If not, I would call a broker and ask them what the rate is. This rate changes whenever the Chairman of the Federal Reserve changes it. The stock market reacts to it and it is supposed to help the general economy though sometimes this back fires.

I could sit here and type the entire explanation of what happens. Unless you are a Finance or Economics you will have a tough time understanding this. You will have probably found a new sleeping aid as well! I am going to make this simple. Whatever the Fed Rate is, that is the rate banks borrow their money at. When the Fed drops the rate, banks in turn drop their loan interest rates as well. This encourages consumers like us to go out and spend more, pumping money into the economy. When banks borrow from the Fed, they also must have some collateral. The collateral for the banks usually are the deposits. Any guess why the local banks are constantly advertising to come to their bank! The banks borrow from the Fed at approximately 12-1. What does this mean? It means for every $12 they borrow from the Fed they must have $1 of collateral. This information is kept amongst the highest ranking bank officials. Oh they will deny this! How did I find out? One of those high ranking officials showed me. So for every 12 million they borrow, they need a 1 million in collateral. That is simple enough. Therefore, it would not be out of line for you to ask to borrow $10 for every $1 you have in collateral assuming you have a solid credit history! Having a solid credit history is an absolute must!

This is how major companies borrow funds from a bank. For example, lets say they have a property currently valued at $100,000. This would be in the form of land or securities etc. They will ask for a construction loan for a million dollars based on the 10-1 rule. Normally the bank would require a lot more security for a construction loan, but with a solid credit history, a long standing relationship with the bank and a history of successful ventures the bank will probably grant the loan with minimal real estate collateral. Just to set the record straight, this type of financing is restricted to people and business that have been doing this for 15-20 years. If you think that you are going to be able to do this type of financing in the first few years, you are sadly mistaken. Even as a small consumer, you can ask for the 10-1 ratio on a simple loan to buy furniture or remodel a kitchen. You definitely need to know this.

While all this big time financing is going on, you need to continue to deposit to that savings account!

While the strategies in this e-book are directed at young people trying to establish credit for the first time, it can be used by the recently widowed, divorced or someone who has gone through a bankruptcy. These principles are sound and can be used by almost anybody.

One thing I forgot to mention is that most loans in a bank are made by a single loan officer. The loan officer will typically come back with the statement, “I will take this before the committee, I do not see this as being a real problem". I am telling you here and now that committee does not exist on the local levels. If this were a multi-million dollar venture, I would say that yes there will be a meeting, you can bet on that! On the local levels, the branch managers review 99% of the loan applications and are decided between the credit review department and the manager only. The manager listens to the people in the credit department to find out if you met the criteria. Based on that, the Branch Manager, Loan Officer or whatever he/she is called will make the decision! Therefore, it is a general rule of thumb that you as the consumer should establish a working friendship with the Branch Manager in your local bank.

Each time you go to the bank, greet the Branch Manager with a polite “hello, how are you doing". By doing so, you will be slowly be earning the working friendship and by being a prudent saver and customer you will start to earn his or her confidence. You might want to take the Branch Manager out for a business lunch and tell him/her that you want to bounce a few ideas off him or her. It may be worth your while to establish a good working relationship with this person. It certainly could not hurt because when your application for a loan looks a little marginal, this relationship might be the extra little push needed to push the loan application through. Many older citizens who have always paid cash for their goods and services now find that they would like to have the convenience of having a credit card, but they have no credit history. Therefore, they face the same problems with obtaining credit as a young person just starting out. You might also need to use these ideas to develop good credit in the event of a bankruptcy, after you have been through a divorce or have had job difficulties and your credit has suffered and resulted in a bad credit report.

Joseph M. Sabol is a world class Doberman breeder. Please go to or to for further information


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