business & finance
What to Do When
Banks Won’t Lend
O
ne of the biggest obstacles to the
nation’s financial recovery
remains banks who are still
unwilling to loan even though they
have received billions in financial
bailouts. Congress and the Adminis-
tration seem either unwilling or unable
to compel banks to do so. Fortunately
there are other alternatives to bank
loans.
One thing people tend to forget is
banks are “middlemen.” If a bank
loans you money they will charge any-
where from 8 percent to over 25 per-
cent interest. If you deposit money
with the bank they will give you about
2 to 5 percent interest. Although it
takes a little bit of creativity one way
around this banking dilemma is to cut
out the middleman and give both the
lender and the borrower a better deal.
Let’s look at some examples of how
this can be done:
Real Estate Loans until the house has been paid off. The suggests an interest rate that is too
Typically when you buy or sell a buyer makes payments to the seller, high, negotiate for a lower one. Also
house, the real estate agent arranges who continues to make payments to his be informed about the real value of the
financing with a bank. If one bank bank or financing source. There is car you are buying. I’ve seen used car
turns you down, have the realtor try some risk involved. If the buyer does- dealers who will sell a $1000 car for
others. If this still doesn’t work, ask n’t pay the seller will have to initiate $3000 and carry $2000 of the financ-
the realtor to come up with alternative foreclosure and during that process ing. That’s no deal. From the point of
types of financing. In some cases the will have to keep up his own payments view of the used car dealer he can gain
seller will carry the loan for the buyer. to his bank or he, too, will face fore- by carrying financing at a reasonable
One can also seek out private investors closure. Keep in mind the real estate rate for his customers. He has to move
to finance their home purchase (or agent is also a middleman and another cars and if he waits for the banks to
sale). Investors have to put their alternative might be to hire an attorney come around he may be stuck with a
money somewhere and right now the to assist you in the sale. This is par- lot of inventory. If used car dealers
stock market is very volatile. It’s ticularly adviseable if you are doing can carry financing, what is to prevent
entirely possible that a newspaper ad something like a land contract. new car dealers from doing the same?
can put you in touch with a private It doesn’t hurt to ask when shopping
investor. In some states houses can be Auto Loan for a car. If they’re desperate enough
bought and sold on a “land contract.” It’s not unusual for used car dealers to sell and they’re not strapped for cash
Under this type of contract, the title of to carry their own financing. Beware, flow, they may go for it. Finally don’t
the home does not transfer to the buyer however, of the terms. If the dealer rule out the possibility of buying a car
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