Page 19 - Book4E

CHAPTER 3
Savings and Loan Associations (SLAs)
In the early years, commercial banks were not interested in loaning money for non-business ventures like buying a home. As a result, Savings and Loan Associations, designed specifically to help the neglected consumer market, came into being. SLAs first appeared in the 1830s and were known as “building societies.” They provided funds that could be borrowed to buy or build a home. SLAs have also been known as “cooperative banks” in New England and as “home- stead associations” in Louisiana.
The first American savings and loan business began in Frankfort, Pennsylvania, in 1831. It was called the Oxford Provident Building Association and was based on building societies that already existed in Great Britain. Since American commercial banks dealt primarily with commercial and industrial needs, the Oxford Provident was created to give individual consumers a place from which they could borrow funds to buy a home.
Most such early savings and loan associations were not intended to be in business indefinitely. The idea was that after each member of the association had been able to purchase a home, the association would be dissolved. The association members each made a monthly deposit or payment. These deposits didn’t earn interest but made it possible for one member each month to buy a home. The member who bought the home then continued to make monthly payments as necessary until the equivalent of the cost of his home was paid—interest free.
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