Thrift Association

Definition

A Thrift Association, also known as a savings and loan association, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans. They aim to provide home loans at low interest rates to their members. They are cooperatively-owned, meaning they’re owned by the depositors who share in profits.

Phonetic

The phonetics of the keyword “Thrift Association” is /θrift əˌsōsēˈāSH(ə)n/.

Key Takeaways

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1. Thrift Associations primarily operate to promote personal savings and home ownership. They offer a variety of services including mortgages, loans, and savings accounts.
2. They function similarly to banks but are considered cooperative financial institutions as they are owned and operated by their members.
3. They are aligned with members’ needs as any profits made are given back to the members in the form of reduced costs and increased savings interest rates.

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Importance

Thrift Associations, also known as savings and loans associations, are vital entities in the business/finance realm, primarily because they function as one of the key pillars of the financial and banking industry. These associations mainly encourage both savings and homeownership among consumers by accepting savings deposits and offering mortgages and other types of loans. Thrift associations play a significant part in supporting people in purchasing homes, thereby contributing to the growth of the real estate market and the broader economy. They also provide a platform for individuals to save and grow their wealth. Thus, Thrift Associations substantially help in fostering personal finance and the community’s financial stability.

Explanation

Thrift associations, also commonly known as savings and loan associations (S&L), serve a critical purpose in the realm of finance and business. Their primary function is to promote savings and homeownership for individuals and businesses alike. They work by encouraging their members to save money, which the association then pools together to provide mortgage loans to those wishing to purchase property. This largely community-oriented approach allows individuals to invest in their local economies and provides a means of home ownership for those who may not qualify for traditional bank lending.Moreover, through the provision of residential mortgages, thrift associations contribute significantly to facilitating real estate investments, which in turn drive economic growth and stability. Borrowers can utilize the loans to buy, improve, or even construct residential properties. The payment terms and interest rates of such lending are generally more accommodating, making it an attractive option for many individuals. By stimulating local property markets, these associations play a crucial role in overall economic dynamism and contribute to community development and prosperity.

Examples

1. Navy Federal Credit Union: Navy Federal is considered a thrift association and it is one of the largest saving and loan associations globally. While initially serving only Navy personnel, it has significantly expanded its membership to include all forces in the Department of Defense. It provides a wide collection of financial services like credit cards, loans, saving accounts, checking accounts, and certificates.2. TIAA Bank: This is another example of a thrift association. Formerly known as EverBank, TIAA Bank offers a full range of banking and lending services to its customers, focusing largely on retail savings customers and home mortgages.3. Third Federal Savings and Loan: Founded in 1938, this Cleveland-based company is a large thrift association that offers deposit and lending services in several U.S. states, offering competitive rates on mortgages, home equity loans, and savings accounts.

Frequently Asked Questions(FAQ)

Related Finance Terms

• Savings and Loan Association
• Mutual Savings Banks
• Accrual Accounting
• Mortgage Lending
• Financial Intermediaries

Sources for More Information

• Investopedia
• The Balance
• Consumer Financial Protection Bureau
• Corporate Finance Institute