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prime rate

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prime rate

The interest rate charged by commercial banks to their best customers. It is the lowest interest or base rate on which other rates are calculated according to the risk involved. Only borrowers who have the highest credit rating qualify for the prime rate.



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Common indexes used include Prime rate plus x, LIBOR (London Interbank offered rate) or other index, including one developed by the lender.
After the introductory period ends the rate is based on the prime rate plus the margin.
A short-term prime rate is a benchmark for interest rates on loans of less than one year to the most favored borrowers among small and midsize firms and home buyers.
 
 
 
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