Definition Of

Loan Pricing

Loan pricing means determining the interest rate for granting loan to creditors, be it individuals or business firms. It is one of the most important, however difficult task in lending funds to business firms & other customers. Because it is always very difficult to exactly know what the actual loan risk a particular loan application is. Generally the lender wants to charge a high enough rate to make sure that the loan will be profitable as well as it will covers enough compensation against the default risk. On the other hand loan price must be set low enough that helps the customers to find it easy for successful repayment of loan.

Share it:  Cite Term

More from this Section

  • Fixed-amount option
    Fixed-amount option is a life insurance settlement option in which the policy proceeds are paid out in fixed amounts.
  • Offered (Selling) Rate
    Offered (Selling) Rate is exchange rate at which dealers are prepared to sell foreign exchanges in the market and at which potential buyers are
  • Monetary neutrality
    Monetary neutrality is a proposition that in the long run, a percentage rise in the money supply is matched by the same percentage rise in
  • Forward Rate Agreement
    A forward rate agreement (FRA) is an interbank-traded contract to buy or sell interest rate payments on a national principal. These contracts are settled in cash.
  • Act of state doctrine
    Act of state doctrine says that a nation is sovereign within its own borders, and Act of state doctrine domestic actions may not be questioned in
  • Equity reserves
    Equity reserves is the type of bank capital representing funds set aside for contingencies such as losses on assets, legal action against
  • Counterparty
    Counterparty refers to the opposite party to a double transaction; that is, to a transaction involving an exchange of financial instruments or obligations now ...