Is the loan-to-deposit ratio still relevant? By Wasif

Analysts and regulators routinely evaluate a bank's ability to repay depositors and other creditors without incurring excessive costs and while continuing to fund growth. This so-called "liquidity" of a bank is evaluated using a whole host of tools and techniques, but the traditional loan-to-deposit (LTD) ratio is a measure that often receives the most attention.
The LTD ratio—a bank's gross loans divided by total deposits—indicates the percentage of a bank's loans funded through deposits. An upswing in the LTD may indicate that a bank has less of a cushion to fund its growth and to protect itself against a sudden recall of its funding, especially a bank that relies on deposits to fund growth.
Some analysts have argued more recently that the LTD ratio does not convey as much useful information as it once did. For example, it is much more feasible for banks to sell consumer loans than it was in the past. Thus, a bank with a high LTD may have an easy time making new loans and earning fees simply by disposing of its old loans. Banks also have new sources of nondeposit funding such as those provided by the Federal Home Loan Banks. In addition, banks have a much greater array of financial techniques to allow them to better manage their exposure to their funders and maintain their growth in lending, despite having a relatively high LTD ratio.

How does to the LTD ratio measure up?

To test the integrity of the LTD ratio, we used a unique survey of agricultural bankers in the Ninth District. In each survey the banks were asked if they turned down a loan because they did not have available funds. If the LTD ratio still conveys its traditional meaning and is being interpreted correctly, those banks that turned down loans would be expected to have higher LTD ratios. If this relationship does not hold up at smaller agricultural banks, it is reasonable to believe that the LTD is even less useful for reviewing the liquidity of larger banks with access to newer financial technologies and more funding sources.
About 9 percent of the 100 banks surveyed each quarter between 1993 and 1998 refused a loan at some time because of liquidity constraints. These banks had an average LTD of 79 percent, compared with 67 percent for banks that did not refuse loans.
On the surface, then, it appears that high LTD ratios are related to loan refusals. But, to be more certain of this relationship, we needed to account for factors other than the LTD ratio that may hinder a bank's ability to meet loan demand. A more sophisticated statistical test called regression analysis controls for factors that may influence a bank's ability to fund loans. In addition to the LTD ratio, we also examined variables relating to a bank's use of insured and noninsured deposit funding, loan growth, a bank's equity level and the time period when the financial and survey variables were reported. We did not include the size of the bank or the concentration of loans to certain types of borrowers since the banks we examined were all small, agriculturally focused institutions.
The logic for including equity levels is that a bank with high levels of equity provided by stockholders may be better suited to respond to periods of high loan demand. Likewise banks which have had higher insured and uninsured deposit growth may be less likely to turn down loans. In contrast, banks experiencing rapid loan growth may be more likely to turn down additional loans.
Using regression analysis, we found that the LTD ratio was highly statistically significant and robust in explaining the likelihood that a bank would refuse a loan: The higher the LTD the more likely a bank would refuse a loan. Other of the variables were not statistically significant or did not relate to the loan refusal in the manner we expected.
Of course, this initial test is far from the last word on this topic. Because of the importance of liquidity issues to regulators in this district and throughout the country, we will continue to review which tools help identify banks that may be experiencing liquidity problems.

Uk student loans...

Student loans in uk are very popular as many student s fulfill their expenses related to education through these loans only. In fact, student loans in uk are considered as the only feasible way of pursing higher studies for student comings from low and middle income families.student loans in uk have been designed in such a way that they cover the cost of living as well as education expenses.Thus, a student can get loan for accommodation, clothes, food and travel. It has been seen that about 25% of the amount provided as student loans in uk is evaluated on the basis of income of a person.
n past few years, government in uk has taken many steps for providing student loans in an easy manner and at affordable terms and conditions.student loans Scheme is one of them.This scheme had been made for helping student s in meeting their living costs while they are studying. Apart from this, there are many types of lending institutions that provide student loans in uk. Requirements for student loans differ from one lender to another and also depends upon the type of course for which student loan is required like part time course, full time course, distance course etc.Amount of student loan also differs on the basis of financial capacity, nationality and merit of student. Study level of student s also affects loan amount and other terms and conditions.
Various study levels in uk are student s planning to go for higher education, student s currently in higher education, disabled student s, student s with children, mature and post graduate student s, NHS Funded student s etc.It is important to understand here that student s studying in Scotland, Northern Ireland and EU are also eligible for getting student loans.There are many ways in which a student can get information regarding student loans in uk. For example, he can make his search online or he can contact the local student loan award authority.Initial part of application for student loans in uk is managed by this authority and student is also tested for his eligibility and means.
His qualifications for the student loan are also checked.While searching online, a student can easily make application for the student loans in uk online through a reliable lending institution. Like other loans, student loans in uk also attract interest and a student is required to pay principal as well as interest for repaying the amount borrowed. One aspect that needs to be understood regarding student loans in uk is that interest rate is based upon the rate of inflation, which is calculated daily. Similarly, a student can start making payments after the completion of course and after he starts earning 15000 pound sterling annually.student s of all ages are eligible to get the student loans in uk. However, if a person is aged between 50-54 years, it is essential that he confirms that he plans to work after the course is completed.
Getting student loans IN uk
student loans Company or SLC is the leading provider of student loans in uk. It is a public sector organization that had been established for providing financial services with respect to loans and grants to more than 1 million student s studying at different colleges and universities located across uk. student s in all the 4 education systems viz.England, Scotland, Northern Ireland and Wales are eligible to get the student loan. It is important to understand here that student loans Company administers the loans that are government funded. Similarly, government funded grants are also administered through United Kingdom. This organization is responsible for the student support delivery throughout uk and provides loans and grants in partnership with other authorities.
These are Local Authorities in Wales and England, Education and Library Boards in N. Ireland and student Awards Agency in Scotland.Primary role of SLC is to provide financial support to all the eligible student s that are pursuing higher education, paying to higher education institutions towards tuition fee and manage the direct collection of repayments made with respect to student loans in uk. Apart from above, specific tasks are performed by the student loans Company regarding Developed Administrations like payment of necessary education maintenance allowance. It also administers one student loan portfolio on behalf of private sector. SLC is also associated with payment of scholarships and bursaries to various higher education institutions in United Kingdom. A person can easily approach student Loan Company at 21 ST.Thomas Street, Bristol, BS1 6JS.
There are many types of financial help provided by the SLC.Amount of loan that can be obtained by a new full time student in uk depends upon the course chosen by him, place where he is living, and his individual circumstances. Similarly, repayment conditions also vary.Various types of student loans in uk that are provided by the student loans Company are Tuition Fee loans that cover the full cost towards tuition fees, Maintenance loans that cover the different types of costs of living, Grants provided for living costs, etc. Apart from this, scholarships and bursaries provided from colleges and universities are also seen as important source for getting financial requirements fulfilled.In most of cases, total loan amount provided to a student includes tuition fee and maintenance loan.
This amount is paid directly at the start of academic term. As said above also, each student qualifies for 75% of the maximum amount of student loans in uk irrespective of his income. Rest 25% is assessed on the basis of income of a person. Repayment of student loans in uk is carried out through tax system. This starts after a student has completed course and has started earning income. This system is called ICR or Income Contingent Repayment.
Apart from SLC, there are many other sources that can be contacted for getting student loans in uk. For example, a student can easily log on to web site of New Finance, student loans.co.uk. It provides all the valuable information and financial advice regarding student loans.
Similarly, 118 student Ltd is another source of student loans in uk. It was established in the year 2001 and provides information about various lenders approved by FSA that provide student loans. For example, a student can get loan from Alliance and Leicester from 7500 to 15000 pound sterling. These loans are provided as private and unsecured student loans in uk.

Car Buying Tips.......

A new or used vehicle can be the second largest purchase of your life. Unfortunately, many people who buy a vehicle have little knowledge of the product and often make hasty decisions or purchase under pressure. This is why AB Car Sales, would like to offer you two informative tools to help you research your next vehicle: the ability to compare used vehicles online from your home or office and advice and tips on buying a new or used car..

Comparing Vehicle Specifications

Vehicle comparisons can be time consuming and a lot of work. However, this is an essential task when purchasing your next car, truck, SUV, or mini-van: you need to find the vehicle that matches your needs and budget. To save you time and money we would like to offer you the ability to compare vehicles online from the comfort of your home or office. Simply select an automobile from our used vehicle inventory and click “Compare,” then select another vehicle of your choice for comparison. This will give you the opportunity to view specifications about similar vehicles side-by-side without driving around town or spending endless hours on the phone. You will be able to view photographs and details about each vehicle.

Car Buying Tips

We want to ensure that your next car purchase will be an enjoyable one. Listed below are many tips and questions about buying a new or second hand car. Take this time to research your next vehicle and make an informed decision.

Before Purchasing a Vehicle

Calculate your budget. This important step will set your limit and help you decide if you are in the market for a new or used vehicle. Research the vehicles you are interested in or ask friends for recommendations. If you have a mechanic ask which vehicles are good value or at least which ones in his or her experience are lemons or problematic. Consider the market. The vehicle vendors include New and Used Car Dealerships, Used Only Dealers, or Private Sales through newspapers or other resources.

Buying a Used Vehicle

The Better Business Bureau shows the used vehicle market as a major source of consumer complaints. Many buyers depend largely on a quick examination and what they are told by a private seller or by a salesperson who may have been unaware of defects not revealed by the previous owner. At AB Car Sales we have your best interests at heart and would like you to consider the following before buying a used vehicle from anyone:

Interior: The interior can be a good indicator of high mileage without looking at the odometer. A worn brake pedal or driver’s seat can indicate high mileage even though the odometer displays a low reading. Look under the floor mats for water leaks. New floor mats are one of the cheapest and easiest ways to hide a worn interior or leak. The floor under the accelerator can be a key spot of excessive wear. Check the windshield for cracks and rock chips. Indications of a tampered odometer are fingerprints or scratches on the interior of the dash cover, misaligned odometer numbers, or scratch marks on the numbers. If the vehicle has a t-roof or sunroof check for water marks on the headliner or if possible test the roof by spraying it with a hose.
Suspension: Check the level of the vehicle from the front and back. An un-level vehicle may have worn springs.Test the shock absorbers by bouncing the vehicle – a vehicle with good shocks and struts will only bounce once. If the vehicle does bounce more than once inspect the shocks and struts for leaks. Air suspension is even more critical to check – these components can be very costly to repair. Tires that are worn on the outer edges can indicate a vehicle with a front-end that is not aligned. If the vehicle pulls to the left or right during a test-drive this could also indicate a front end that is out of alignment. When you approach highway speed a shaking steering wheel or front end that shimmys or vibrates can be a sign of un-balanced tires. Finally, the car should not bounce while driving or lean excessively during cornering, both can be a signs of worn shocks or struts.
Rear End / Drive Shaft: With the car started put the vehicle in gear. If you hear a loud clank it may mean the universal joints (a pair of hinges used in a drive-shaft for cornering) are worn. During the test drive, if you hear a whining or humming noise from the rear it can be a sign of worn gears. And bad universal joints can produce a vibrating floor or body at high speeds.

Front Wheel Drive Axles: Front wheel drive axles consist of (CV) constant velocity joints. These allow a smooth transfer of power to the front wheels through the wide range of angles they need to be turned. Test the CV joints by first turning the wheel all the way to the right and slowly accelerating. To test the other side, repeat this procedure. If the axles are bad you will hear a bad clicking noise from the axle. Grease thrown around the inside of the front tires will tell you that the CV joints need to be replaced.
Signs of Structural Repair: Do all of the vehicle's panels match? Is there paint over-spray or primer in the doorjambs, lights, trunk or engine compartment? Check the gaps between the body panels. Unequal gaps may indicate improper panel alignment or a bent frame. Do all the doors shut properly? Check the frame for severe rusting or repairs. Make sure the keys open all door and trunk locks. If not, the doors or trunk may be from different vehicles.
Engine: Is it clean or covered with oil and dirt and obviously neglected? Is the engine very clean but the rest of the compartment is dirty? This could be a sign that the engine was recently cleaned using degreasing fluid and may have been done to conceal some type of problem. Look for oil leaks around the valve cover, head-gasket, and oil pan. Check the inside of the oil cap and valve cover for sludge. A well-maintained engine will always be clean inside. Check the oil. If it is clean, tan, or brown, not black, ask when the last oil change was done. After test-driving the vehicle check the oil once more. If the oil has turned black the engine has serious wear. When you first start the engine check the exhaust fumes, blue indicates oil that is being burned. Once the engine has warmed up rev the engine and check the exhaust fumes again. Lastly, rev the engine a few more times and listen for knocking sounds or ticking sounds that increase with engine speed. These can indicate costly repairs.

Transmission: Check the fluid for colour, smell and level. Transmission fluid level should be checked while the vehicle is running and on level ground. The fluid should be pink to red in colour: not be brown or black. Brown or black fluid may have a burnt smell to it, indicating possible internal damage to the transmission. Next, check the transmission's engagement. Shift from park to drive, then from drive to reverse and observe the amount of time the transmission takes to engage. The transmission should engage firmly and not take very long to engage. While shifting, listen to any banging, grinding, whining and squeaking. Such noises indicate a worn or broken engine or transmission mount or possible internal problems. When road testing the vehicle, observe transmission shift points when the transmission shifts gears. The shift points should be smooth, yet positive and firm. You do not want the transmission to slip or slam into gear. Get the vehicle up to highway speed to ensure you have gone through all the gears. After the car is at highway speed depress the accelerator slightly to increase speed to ensure that the transmission is not slipping and that the transmission down-shifts properly.
Vehicle History: Finally, and most importantly check the vehicle’s history for any accidents or liens. If you're purchasing the vehicle from a dealership directly they will be able to provide any history reports and lien checks you need. Otherwise, you will need the vehicle’s ID (VIN) number. If you have a record of a lien search and no lien was registered when you took ownership, a lien holder will not be able to seize your vehicle.
Consider your options when you head out to purchase your next vehicle. Make an informed decision and you’ll enjoy a satisfying experience and years of trouble-free driving.
We would like to thank-you for visiting our web site and invite you to browse our Used Vehicle Inventory. (Don't forget the vehicle comparison). If the vehicle you are looking for is not listed there, then please feel free to search our Buying Group Database .
Located in the beautiful Thompson-Nicola Valley, of BC, AB Car Sales is here to satisfy all of your vehicle needs. Come see us for a test drive. We would love to meet you in person.

Saving For a Down Payment on a House

A traditional mortgage generally requires the buyer to place a down payment of 20% of the purchase price, but with recent changes lenders have made it possible to purchase a home with as little as zero down. In order to receive the best possible interest rates and to avoid private mortgage insurance, it is still a wise decision to have a significant down payment, but how can you save tens of thousands of dollars for this purchase?

How Much Should You Save?

The magic number that is most commonly referred to is 20%. At this point lenders will not require you to purchase Private Mortgage Insurance (PMI). The PMI is an additional cost built into your mortgage that protects the lender in the event of a default. Generally you can cancel this insurance once you have built up 20% equity in your home.

Ideally you would like to be able to save up a 20% down payment but that can be a daunting task. Even with a home priced at $200,000 you are looking at coming up with $40,000. The good news is that if you do come up with a substantial down payment you have instant equity in your home which can be valuable down the road when you decide to sell the home.

Don’t let the 20% rule keep you from owning a home though. While it is to your advantage to save money by avoiding PMI and to build equity into your home as quickly as possible you may be able to find the home of your dreams and save money with a smaller down payment.

Sources of Down Payment Funds

When you begin to plan for the purchase of a home there are many possible sources for these funds. Typically the down payment will come from a source of cash savings but there are other options available.

Check with the Federal Housing Administration or Veteran’s Administration as well as state housing authorities for programs that can assist first-time and low to moderate income families to obtain a mortgage with a lower down payment. The U.S. Department of Agriculture’s Rural Housing Service also offers a program intended to encourage low to moderate-income buyers to purchase in rural areas.

If you currently have money saved up in retirement accounts there may be additional resources available to you. Some 401(k) and 403(b) retirement plans allow participants to borrow money from the account for a new home purchase. Additionally, if you have an IRA account there are provisions to allow withdrawals for first-time home purchases.

Put Your Savings to Work

If you are saving money for a down payment you want to make sure it is working for you. Money that is sitting in a savings account earning less than 1% interest won’t do much in regards to helping you reach your savings goal faster. If you have a time frame set for when you plan on purchasing the home there are a few options for your money to make money while you wait.

If your plan is to purchase a home within the next few years you may want to look at a high-yield savings or money market account for holding the down payment funds. Currently you can receive rates upwards of 5% APY on these types of accounts. Another option could be to put the money into a certificate of deposit (CD). You have less flexibility and liquidity with these accounts but the yields can be attractive as well.

Mortgage Life Insurance

Owning a home is a dream for most of us, although it is an expensive one. The monthly payments usually take up a big slice of our monthly income, and the sudden loss in the event of you or your spouse's early death may leave your survivors unable to make payments. To make your family is protected from financial hardship, consider Pick-a-Term Mortgage Protection insurance.

Pick-a-Term Mortgage Protection has a descreasing death benefit to match your mortgage balance at the beginning of each year. And because the death benefit decreases along with your mortgage balance, the cost of Pick-a-Term is less expensive when compared to non decreasing term life insurance.

Life Insurance: Decreasing Or Not?

If you go to your local bank, along with the mortgage they will try and sell you what they call "mortgage insurance". This is not "mortgage insurance" but "life insurance" where they protect themselves by having you buy their policy. You need to be clear how this operates; you are paying for an expensive policy which they own and in which they are the beneficary. Further, the amount of the policy decreases though the premium remains the same. If they decreased the premium along the coverage, it may not be too bad, but they don't. The way it is now the policy decreases, you pay for it, they own it, control it and will benefit from it.

So if you want to control your own financial life, get your own life insurance policy. Then you can control the level of coverage that suits you.