prime rate

n.
The lowest rate of interest on bank loans at a given time and place, offered to preferred borrowers. Also called prime interest rate.

The interest rate that commercial banks charge their most credit-worthy customers. Generally a bank's best customers consist of large corporations.

Investopedia Says:
Default risk is the main determiner of the interest rate a bank will charge a borrower. Because a bank's best customers have little chance of defaulting, the bank can charge them a rate that is lower than the rate that would be charged to a customer who has a higher likelihood of defaulting on a loan.

Related Links:
For investors considering buying debt securities, a credit rating is an essential tool. What Is A Corporate Credit Rating?
Understand the various factors that influence them so you can learn to anticipate their movements for profit. Trying To Predict Interest Rates
Do you know how your borrowing activities affect your credit rating? Find out here. The Importance of Your Credit Rating
A look at the various components and considerations of the personal and financial data that go into this dossier. Consumer Credit Report: What's on It

Base rate that banks use in pricing commercial loans to their best and most creditworthy customers. The rate is determined by the Federal Reserve's decision to raise or lower prevailing interest rates for short-term borrowing. Though some banks charge their best customers more and some less than the official prime rate, the rate tends to become standard across the banking industry when a major bank moves its prime up or down. The rate is a key interest rate, since loans to less-creditworthy customers are often tied to the prime rate. For example, a Blue Chip company may borrow at a prime rate of 5%, but a less-well-established small business may borrow from the same bank at prime plus 2, or 7%. Many consumer loans, such as home equity, automobile, mortgage, and credit card loans, are tied to the prime rate. Although the major bank prime rate is the definitive "best rate" reference point, many banks, particularly those in outlying regions, have a two-tier system, whereby smaller companies of top credit standing may borrow at an even lower rate.

The lowest commercial Interest Rate charged by banks on short-term loans to their most creditworthy customers. The prime rate is not the same as the long-term mortgage rate, though it may influence long-term rates. Also, it is not the same as the consumer loan rate that is charged on personal property loans and credit cards. Mortgage rates and consumer loan rates are generally higher than the prime rate, but exceptions occur at times.
Example: BankAmerica and Citicorp offer a prime rate of 7%. Chevron/Texaco is a prime customer and at that rate may borrow loans up to 270 days. BankAmerica offers construction loans at 4 Points over the prime rate.

This entry contains information applicable to United States law only.

The lowest rate of interest that a financial institution, such as a bank, charges its best customers, usually large corporations, for short-term unsecured loans.

The prime lending rate is an economic indicator and is often used as a measuring point for adjusting interest rates on other types of loans. The rate varies according to economic factors.

The interest rate that banks charge to corporations that are considered excellent risks.

The prime rate is usually the lowest prevailing interest rate; if it rises, rates available to consumers will soon rise.

This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)

today's prime rate	prime interest rate