What is Prime?
In the finance world, prime is short for prime rate, which is the interest rate commercial banks charge their most creditworthy customers, which are usually corporations.
How Does Prime Work?
Anyone who has borrowed
In general, the rate is the same among nearly all the surveyed banks, and they tend to change their rates at the same time. When 75% of these banks (23 banks) change their rates, TheJournal changes its average.
Why Does Prime Matter?
Prime is one of the most widely used market indicators, albeit a lagging one, and it is a major for and rates. It is often the basis for adjustable-rate loans. For example, if a bank is a home equity loan at “prime plus 5” and its prime rate is 6%, then the bank is essentially borrowers an 11% loan (6% + 5%) whose interest rate fluctuate with the prime rate. It is important to remember that not everyone qualifies for prime -- this rate is only for customers least likely to default.
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