Final answer:
Comparing a commercial bank, credit union, and savings and loan using the PACED model involves looking at their services, regulatory environment, and member benefits.
Banks offer a broad range of financial services; credit unions offer member-based benefits and savings and loan associations focus on housing-related loans with historically regulated interest rates.
Step-by-step explanation:
The PACED model involves evaluating each institution based on several criteria: their purpose, services offered, regulatory environment, and membership.
- Commercial banks are financial institutions that provide a wide range of services, including accepting deposits, offering loans, and other financial products to both individuals and businesses.
- Credit unions are member-owned financial cooperatives that also accept deposits and provide loans, but usually offer better rates and are limited to their membership, typically associating with a group like employees of a particular company or members of a community.
- Savings and loan associations, also known as thrifts, are similar to banks but traditionally focused on offering housing-related loans and may offer slightly higher interest on deposits. All these institutions function as intermediaries between savers and borrowers.
Historically, savings and loans were distinguished by the type of lending and interest rates they could offer, which were once regulated by federal law, requiring them to focus on housing-related loans. Over time, these regulations have changed, allowing more competition and similarity in services between these institutions.
Credit unions are unique in that they usually extend benefits such as higher savings rates or lower loan rates to their members, which can include groups like the Government Employees Credit Union (GECU) or Navy Federal Credit Union.