Prime Rate or Prime Lending Rates (PLR)

Prime rate or Prime lending rates (PLR) refer to interest rates charged by commercial banks for their most credit-worthy customers. Generally credit-worthy customers consist of large corporations.

The rate is a key interest rate, since loans to less-creditworthy customers are often tied to a high interest rate. For example, a “Company A ” (most credit-worthy customer) may borrow at a prime rate of 5%, but a less-well-established “Company B” may borrow from the same bank at prime plus 1, or 6%.

Bank’s good standing customers have little chance of defaulting than customer who has a higher risk of defaulting, so the bank can charge them a rate that is lower than the rate that would be charged to other customers.

Published on 30 Jun 2008 | Career & Education| Company & Markets

Tags :commercial banks, creditworthy customers, high interest rate, interest rates, large corporations, prime lending rates, prime rate

You may also be interested in:

Trackback URI | Comments RSS