Leveraged Loan

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DEFINITION of 'Leveraged Loan'

Loans extended to companies or individuals that already have considerable amounts of debt. Lenders consider leveraged loans to carry a higher risk of default and, as a result, a leveraged loan is more costly to the borrower.

BREAKING DOWN 'Leveraged Loan'

Leveraged loans for companies or individuals with debt tend to have higher interest rates than typical loans. These rates reflect the higher level of risk involved in issuing the loan . In business, leveraged loans are also used in the leveraged buy-outs (LBOs) of other companies.

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