Using Banks and Bank Accounts/Getting loans

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Question
A friend of mine was telling me about how he was unable to get a personal loan once, and in my mind he should have gotten it. He said he had $15,000 in that bank, he owns a house, has better than good credit, no debt, and was only asking for $5,000. Apparently because his income is only about $15,000/yr they didn't consider it a safe bet despite that he already had 3 times what he was asking for in saving. I guess the person asked why he didn't just use that money. Should that really matter? I mean I think everyone deserves to keep some money in savings for a rainy day? Why shouldn't he have been able to get a loan?

Answer
Hi James,

Banks use a debt to income ratio model (Monthly Debt/Monthly Income) for loans and lines of credit, they want to make sure a person does not overextend themselves and get in trouble.

Even though your friend has $15,000 in the bank, it is not guaranteed that it will stay.  Banks use a guarantee on income roll from a job as ability to repay the loan.

Hope that helps

Using Banks and Bank Accounts

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George

Expertise

Anything pertaining to Commercial or Retail Banking. Including, Interest rates, Lending, as well as Prime Rate questions. Also can help with online banking questions including all regulations.

Experience

Retail and Commercial banking since 2002. Currently employed as an Assistant Vice President at a Commercial Bank.

Organizations
Chamber Of Commerce, National Notary Association

Education/Credentials
Extensive credit knowledge.

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