Question by natasha: Where does all the money come from when the bank gives out loans?
I know the money has to come from somewhere. But the money in the bank is people’s money. It all belongs to people. So where does the money come from when they give out loans. They can’t be giving out people’s money to other people, right? I don’t want guesses…I want a real answer…Do some research before and then get your 2 points {and answer my question correctly!!!} THANKS!!!!
Best answer:
Answer by Wyld Bill
that is exactly where it comes from.
banks invest their depositors money to make money for the bank to pay salaries, maintenance, and other costs associated with running a business. some of that money is invested in outside investments other is used to make loans.
ideally you want to charge more in interest than you pay to depositors. quick example the bank i work for has a 1st position home refi loan. it is at 5.24% apr. we are paying on our highest demand account 2% apy. therefore we are making a profit because we are paying less than being paid.
5.24-2.00=3.24 gross margin
the problem is the banks are making risky loans(or were). and we can see what has happened. they allowed their capital levels to get to low and banks are failing. over 70 this year last time i heard.
What do you think? Answer below!
