I understand how very easy it is to dislike our banks.
They make multi-billions in profit each year, while increasing the fees that we pay for their services and they seem to keep hiking rates on our loans, even without increases in official interest rates. They are big, fat, easy-to-aim-at targets for derision, skepticism and anyone looking for something to blame. To some people, the banks seem to be much more interested in profits at all costs rather than helping us with our financial needs.
Just imagine for a moment, if you will – what would your life be like if there were no banks?
You wouldn’t have anywhere to deposit your income and savings for safe-keeping.
You wouldn’t have a credit card to make buying anything easy and convenient.
You couldn’t get a personal loan for that holiday, car or boat.
You wouldn’t have a home loan so that you could own a home.
You wouldn’t own a home because you wouldn’t have the cash to buy one.
You would not be able to own investment property with a loan so that you can build your wealth.
Without strong profitable banks, operating in a highly regulated financial system, our whole way of life would be incredibly different to how we live now.
Modern banking systems have facilitated the owning of assets and wealth creation much more easily than in past generations for most people. For example, without the advent of mortgage insurance, which really only came in to being in the early 1980’s, you would still have to save up 20-30% of your deposit for a home with one bank for a minimum of three years – and then pray that they approved your loan application when the time came. Now, you can get a (owner-occupier) home loan with just 10% deposit, with almost any bank you like.
The first recorded moneylending was done by the priests in the temples of Egypt. Later the Romans adopted a formal banking system, which ran alongside the moneylenders. The renaissance period saw the emergence of the incredibly powerful (financially & politically) Medici Bank in Florence (run by the Medici family). The Medici’s improved the general ledger system through the development of the double entry system of debits and credits (deposits & withdrawals). Modern banking practices adopted by the British and perfected by the Americans have formed massive financial global institutions that oil the wheels of global commerce. Banks have come a long way since the ancient world, but the basic business practices remain the same. They loan money, in various forms for many different purposes, to people who need it, in exchange for a return to them by way of interest and capital repayments.
Without them we would be living a third world existence.
In my investing career I have had many more declined requests for funding than I have ever had approvals. But every approval that I did achieve, enabled me to undertake an investment that would ultimately help grow my wealth. I love that.
I can’t imagine how long it would have taken, or even if it would be possible for me to save enough cash to buy a property outright early in my investment career.
So I am grateful for banks and the banking system.
I need them and they need me.
I found out today about a new evolution in loan products, specifically for people who have a home loan and a loan over their investment property/s. This new product will allow people in that situation to combine the loans, and maintain an interest rate on their own home from just 2.5%.
Yes. From just 2.5%.
That’s the lowest interest rate for a home loan that I have ever seen in Australia.
I think I love that! I’ll tell you more about it in the next few weeks.
When I read articles or hear commentary bemoaning the scoundrel banks, I just block it out and send some mental love to my lenders.
They are going to help me keep building my wealth.
And for that, they deserve a little love.
Don’t you think?