what is prime rate?

Answer 1

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

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.

Answer 2

Prime rate is the interest rate given by a bank to its most creditworthy customers. Prime rate goes up and down, usually as a direct result of the Fed discount rate being raised or lowered by the Federal Reserve Bank Board, which meets the first Tuesday of each month. However, many banks actually lend money below prime rate to some business and retail customers.

Answer 3

Prime rate is the minimum rate that banks loan money to their most preferred customers for financing largely unsecured loans (ie, not 1st mortgages and cars, which are lower). It is generally 3 basis points (ie 3%) above the overnight bank lending rate adjusted by the Federal Reserve frequently in monthly meetings.

Right now, the overnight bank lending rate is 5.25% (that's how much the banks borrow for) and the Prime Rate is 8.25% (that's how much the banks minimally will lend for).

A home equity loan is usually between 0 to 1% above the Prime Rate. I have one at a prime+1/4% for example. Any fixed rate loan that is at 8.25% right now or lower is a great loan by today's standards!

Answer 4

The prime rate in the Wall Street Journal for Thursday 10/19/06 is 8.25 percent.

Answer 5

It is the rate that banks pay for overnight loans from the Federal Reserve Bank.

The current prime rate is 5.25%.