Machines Offer Loans, Not Just Quick Cash FUTURISTIC FINANCE

By Garrett Boehm, Monitor | The Christian Science Monitor, July 10, 1996 | Go to article overview

Machines Offer Loans, Not Just Quick Cash FUTURISTIC FINANCE


Garrett Boehm, Monitor, The Christian Science Monitor


Traditionally, the process of seeking a loan at the local bank has been a tedious, arduous, and sometimes daunting, task. But at some banks, obtaining a loan of up to $10,000 can now take less than 10 minutes - and it isn't even necessary to confront a loan officer.

At Farmers First Bank, based in Lititz, Pa., five automated loan machines (ALMs) similar to the ubiquitous automated teller machines, are available to customers.

Applicants use a touch screen to enter information, which is automatically analyzed, and the customer is either rejected, asked to contact a bank loan representative, or, ideally, receives a cashier's check on the spot.

Soon more than 25 banks across America will be offering ALMs, which were introduced last year by Affinity Corp. of Columbia, S.C. The banks range from giants such as NationsBank and Banc One to little Shoreline Bank in Benton Harbor, Mich.

Analysts see the move as part of broader changes that include banking by telephone and computer on-line services.

"Community banks must react to the tremendous technological change that is sweeping the entire financial services industry, or suffer the consequences," says Paul Pustorino, a partner at the Boston office of consulting firm Grant Thornton LLP. "There is an entire generation of customers growing up today who interact with computers and other technology-based products every day. These customers aren't just comfortable {with these products} - they expect banks to offer them."

Surprisingly, the innovative ALMs are hitting the marketplace in a period when loan defaults are at a high level. A June report by Gerard, Klauer, Mattison, & Co., a New York investment house, cited bank loan-loss levels almost as high as during the 1991 recession. Although the losses stem largely from credit-card problems, making loans more easily available could add to default risks.

But Edward Balderston Jr., a senior vice president at Farmers First Bank, says the ALM grants unsecured loans using the same credit standards as a loan received from an officer at one of the bank's branches. …

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