Borrowing For Car, Home and Education Often Turned Down

Tuesday, April 21, 2009, AM | 1 Comment

Article on abcnews.com “Banks Take Billions From TARP, but Give Fewer Loans ” by Russell Goldman published on April 21, 2009.

Excerpts from the article:

Crunching numbers provided by the Treasury Department, the Wall Street Journal Monday found that the biggest recipients of the government bailout made or refinanced 23 percent fewer new loans in February than in October, the first month banks received TARP funds.

Excluding mortgage refinancing, consumer lending dropped by about one-third from October to February and commercial lending fell about 40 percent, according to the Journal. That means fewer people are getting loans to buy homes and cars or pay for school, and fewer business are getting capital to expand.

Experts say the recession has forced the banks to be picker about who gets a loan. Someone who was eligible two years ago, may no longer make the cut.

Having a good credit score is not enough to get a loan nowadays. Banks are not just looking at how promptly you pay your loans, but also the ratio between one’s debt and their income. If people are using most of their income to pay already existing debts, banks are less likely to loan them more money.

The banks’ ability and likelihood to make loans is not just important for individuals and businesses, but for the economy as a whole. The level of lending is important for determining the pace with which the economy will rebound.

Though the figures the Journal analyzed came from the Treasury Department, the paper’s conclusions contrast with the evolving picture of lending that has trickled out of the government since the beginning of the bailout last autumn. According to the paper, Treasury “crunches data in a way that some experts say understates the lending decline.”

The Congressional Oversight Panel on TARP, an independent agency, says it’s crunching Treasury’s figures and will release its finding next month.

Moral of the story
Good news, bad news and any kind of news is good and bad. If it affects an individual in a good way, for that person it is good news and vice versa.

Some economists suggest that TARP money is not taxpayers money. IRS has taxpayers money. TARP money will become a burden on taxpayers a few years from now when the public or rather the Treasury does not get expected return on the loan to the banks and other financial institutions.

Notice this in the article: “Having a good credit score is not enough to get a loan nowadays. Banks are not just looking at how promptly you pay your loans, but also the ratio between one’s debt and their income. If people are using most of their income to pay already existing debts, banks are less likely to loan them more money.”

Read the abcnews.com article in full: Banks Take Billions From TARP, but Give Fewer Loans.

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  1. One Response to “Borrowing For Car, Home and Education Often Turned Down”

  2. By Pratibha Chopra on May 16, 2011, 6:46 am | Reply

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