American Lending In The 20th Century

An old bank building in the state of New York
A Short History of Lending In The US
Part 1 American Lending In The 20th Century
Part 2 The 20th Century Boom In Consumer Goods And Lending
Part 3 The Power Of Consumers In The 20th Century
Part 4 Consumer Credit And The American Dream Today

Looking back at what went before is a great way of learning about the current financial state of the world. Just like other countries, the US has always had some kind of credit on offer for the ordinary citizen as well as those who were wealthy. In this article we are going to look at some of the ways in which credit helped the first pioneers to move to the US and to start up more prosperous lives. We can also see how the increased availability of credit has affected everyday life.

  • Credit as the basis for development
  • 20th century American lending
  • Advances in technology and credit

Dreams built on credit

In spite of the stories told about the first people who came to the US being thrifty, frugal, hard working and independent, many of the first settlers were actually financed by wealthy merchants in the UK.

Of course, the Pilgrims had all of these great attributes otherwise they would not have survived and made such a success of their expedition. But, these pioneers were originally sponsored by well off English merchants and in return for the money to fund the trip to the New World, they agreed to work for several years without making any profits. So, credit was operating successfully even as far back as the 17th century.

The lack of physical money in rural  parts of the US made credit necessary

If you were under the impression that credit is a totally 20th century phenomenon just take a look back at periods like the 19th century when many Americans contributed to building up the country by borrowing and running up debts in order to start up a farm or other business.

It was often the case that keeping going depended upon credit from the local store. In fact, the actual lack of physical money in rural parts of the US was also a factor which made buying on credit a necessity not a luxury. So, even though contemporary moralists will often frown upon the current climate of apparently unlimited credit, there was never a time when US citizens did not make use of borrowing. The American Dream was built on hard work, enterprising and innovative people and installments.

Lending in the 20th century

1908 was a memorable year. The first Model T Ford came off the production line and in comparison to other cars it was cheap. Henry Ford wanted his design to be accessible to all Americans but many found it difficult to raise the cash needed to buy one of these great new motorized carriages.

A restored Ford Model T on display at an exhibition

The initial price of the car was $850 and in today’s money it would cost you over $20,000. So, for most families it would take many years of saving to achieve their dream of owning a Ford. By 1919, General Motors came up with a plan and opened up a new wing of the business that offered finance to buy a car. The first automobile loans required a deposit of 35% of the vehicle’s value and you had to pay off the loan in a year.

GM invested heavily in advertising and marketing but Ford and its founder did not get involved in credit at this stage. Henry Ford was very disapproving of people getting into debt. However, if he wanted the company to make profits he was forced, in time, to get over his misgivings.

How the first production car reshaped loans

If you did not want to go into debt or could not afford the initial high deposit and regular payments, there was another way to get hold of a Ford. Some Ford dealers offered a plan where you could make weekly contributions and when you had enough money you could take the car.

The first automobile loans required a deposit of 35% of the vehicle’s value and you had to pay off the loan in a year.

However, as most Americans wanted the latest fancy cars, General Motors soon overtook Ford as the leading automobile manufacturer and by 1928, Henry Ford gave in and the company started up its own subsidiary business that offered loans.

A Short History of Lending In The US
Part 1 American Lending In The 20th Century
Part 2 The 20th Century Boom In Consumer Goods And Lending
Part 3 The Power Of Consumers In The 20th Century
Part 4 Consumer Credit And The American Dream Today

About the author

Mark Larsen

Mark Larsen has worked in the finance industry for over 20 years. Over the course of his career, Mark has amassed experience in personal finance and especially short-term lending. He shares his valuable insights on onlinecreditusa.com