Loan Loss Provision

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DEFINITION of 'Loan Loss Provision'

An expense set aside as an allowance for bad loans (customer defaults, or terms of a loan have to be renegotiated, etc).

Also know as a "valuation allowance" or "valuation reserve".

INVESTOPEDIA EXPLAINS 'Loan Loss Provision'

This would be a bank's equivalent of a manufacturing company's allowance for returns on goods sold.

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