Savings and loan associations, also called thrifts, are similar to banks with the exception that they specialize exclusively in handling savings deposits and making secured loans. Though U.S. savings and loans were deregulated in the 1980s, allowing the institutions to make riskier loans in competition with traditional banks and resulting in losses for many customers, an honest, secure thrift may still have several advantages over a bank.
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Most banks offer both secured loans, which are backed by property, and unsecured loans, which aren’t tied to any sort of collateral. Savings and loans reduce risk by specializing in mortgages and other loans secured by land, which allows them to offer higher interest rates on savings deposits than most traditional banks.
Thrifts are legally required to limit 65 percent of their lending to mortgages and other types of consumer loans. As a result, most savings and loans offer a wide variety of home loans compared with other types of financial institutions. Additionally, they may have more flexibility to develop a loan that suits your specific financial needs—for instance, if you are a high credit risk or a first-time home buyer.
Because savings and loans specialize in low-risk 30-year conventional mortgages, they are less likely than other financial institutions to sell real estate loans to investors. Lenders that packaged risky loans into bonds, which they then sell to multiple investors, were a contributing factor in the U.S. economic crisis of 2008.