Building and loan associations were organizations that provided loans to members for buying homes. The organizations were formed by a community of low income members that made regular payments into the fund. Members owned shares in the organization where they have rights to a loan at some point in time or dividends. Because most members were working class, each organization had limited funds and had some form of system, such as an auction or waitlist, to decide who received a loan as funds became available. These organizations were modeled after similar British organizations in the 1830s, and they were replaced after many disastrous closures during the Great Depression with savings and loan institutions that had government backing. Building and loan associations provided a way for millions of Americans to get home loans when modern forms of mortgages did not exist.
[Last updated in June of 2021 by the Wex Definitions Team]