prime rate

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Prime rate

The interest rate at which banks lend to their best (prime) customers. More often than not, a bank's most creditworthy customers borrow at rates below the prime rate.

Prime Rate

The best available interest rate under most circumstances. In general, only the most creditworthy customers receive the prime rate, but this is not always true. In any case, a prime rate serves as a benchmark against which other interest rates are compared.

prime rate

A short-term interest rate quoted by a commercial bank as an indication of the rate being charged on loans to its best commercial customers. Even though banks frequently charge more and sometimes less than the quoted prime rate, it is a benchmark against which other rates are measured and often keyed. For various reasons, a rising prime rate is generally considered detrimental to security prices. Also called prime.

Prime rate.

The prime rate is a benchmark for interest rates on business and consumer loans.

For example, a bank may charge you the prime rate plus two percentage points on a car loan or home equity loan.

The prime rate is determined by the federal funds rate, which is the rate banks charge each other to borrow money overnight. If banks must pay more to borrow, they raise the prime rate. If their cost drops, they drop the prime rate. The difference between the two rates is three percentage points, with the prime rate always the higher number.

The federal funds rate itself is determined by supply and demand, prompted by the actions of the Open Market Committee of the Federal Reserve to increase or decrease the money supply.

prime rate

the INTEREST RATE charged by COMMERCIAL BANKS for short-term LOANS to their most preferential customers. The prime rate is somewhat lower than other commercial borrowing rates but applies only to what may be called ‘blue-chip’ companies, generally large companies with the highest credit ratings. See BANK LOAN, BASE RATE.

prime rate

Traditionally defined as the rate of interest charged by a financial institution to its best customers. In reality, many commercial loans are quoted in terms of “prime minus one quarter,”for example, which indicates there are better rates than prime. In addition, many lenders offer rates based on the London Interbank Offered Rate (LIBOR), resulting in interest rates less than prime. Today,prime rate is often just a published rate by a financial institution,called its prime rate whether it is the lowest offered rate or not.

References in periodicals archive ?
0 million facility which had a significant higher interest rate of prime plus 3.
The new line-of-credit will bear an interest rate of 170 basis points above LIBOR, compared with the current facilities' rate of prime.
6 million and an interest rate of prime rate plus 2%.
The loan will carry a variable interest rate of prime plus one percent, with no points being charged.
The term loan carries an interest rate of prime plus 1 percent and the revolving credit carries an interest rate of prime plus 3/4 percent.
Coach Industries (OTCBB:CIGI), offering an array of financial services and insurance products to commercial fleet operators, today announced the Company has completed a capital finance restructuring of the Company's outstanding Convertible Debenture by securing a $7 million Non-Convertible Term Note at an interest rate of Prime plus 1.
Another piece was a Goldman Sachs Mortgage Company financing for $150 million at an interest rate of prime plus 3, pre-payable at any time.
6 million, at an interest rate of prime plus one-half percent, payable monthly.
If your home equity line of credit balance becomes 61 days past due, the promotional rate of Prime - 1/2% will revert back to the standard rate, calculated as described below.
The funds are held in an interest-bearing escrow account at Citibank earning annual interest at the attractive rate of Prime minus 1.
The facility bears an interest rate of prime plus 1.
0 million based on certain percentage of eligible accounts receivable and inventories at an interest rate of prime plus 2 percent per annum, subject to certain reductions based upon growth in the company's stock price.