Question

Savings Institutions, Credit Unions, and Finance Companies have been successful as “niche lenders,” that is, specializing in one or more specific areas of lending.

            A. In what lending area does each specialize?

            B. As compared to Commercial Banks, what advantages and disadvantages does each have?

Answer 1

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Answer:

A)

• The specialization of savings institutions is that it takes deposits from the savings of customers and give mortgage loans.
• Credit union organizations are financial co-operatives that specialize in personal loans.
• On the other hand, finance companies do not accept actual deposits. The institutions are involved into commercial paper and long term security issues.

B)

Advantages:

As compared to commercial banks, these institutions have a personalized set of customers that are different from the commercial bank customers. Commercial banks deal with business lending and securities while the above mentioned institutions deal with personal lending predominantly.

Disadvantages:

These instiutions are now increasing their services so the similar kind of services are being provided by the commercial banks as well. So competition is increasing.