Loan Loss Provision

Loading the player...

What is a 'Loan Loss Provision'

A loan loss provision is 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".

BREAKING DOWN 'Loan Loss Provision'

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

RELATED TERMS
  1. Renegotiated Loan

    The result of an agreement between a borrower and a lender to ...
  2. Direct Consolidation Loan

    A loan that combines two or more federal education loans into ...
  3. Allowance For Bad Debt

    A valuation account used to estimate the portion of a bank's ...
  4. Loan Register

    A journal that chronicles the recording of time loans. The loan ...
  5. Cash Basis Loan

    A loan where interest is recorded as earned when payment is collected. ...
  6. Standing Loan

    A type of loan where payments are made of interest only. Repayment ...
Related Articles
  1. Economics

    What is a Loan Loss Provision?

    Banks set aside loan loss provisions to cover losses from bad loans.
  2. Economics

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  3. Professionals

    Introduction To Loans

    Learn about the many types of loans and how they function in business.
  4. Credit & Loans

    Unsecured Personal Loans: 8 Sneaky Traps

    If you are seeking a personal loan, be aware of these pitfalls before you proceed.
  5. Credit & Loans

    When Are Personal Loans a Good Idea?

    You never want to borrow money for frivolous reasons, but these five circumstances might warrant it.
  6. Credit & Loans

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  7. Credit & Loans

    Student Loans: Federal Loan Consolidation

    Federal loan consolidation is a helpful tool for converting an unmanageable payment into a manageable payment by combining multiple semester loans into one loan and extending your repayment schedule. ...
  8. Home & Auto

    Floating Rate Loans

    Floating-rate loans usually allow borrowers to obtain lower introductory rates during the initial few years of the loan, allowing them to qualify for a larger loan than if they had tried to get ...
  9. Credit & Loans

    Student Loans: Private Loans

    While federal loans should always be your first borrowing choice, they may not cover your full tuition – never mind lab fees, books, and room and board. That's where private loans come ...
  10. Retirement

    Personal Loans: To Lend Or Not To Lend?

    Attempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.
RELATED FAQS
  1. What are the differences between delinquency and default?

    Find out more about loan delinquency, loan default, and the difference between a loan borrower defaulting and being delinquent ... Read Answer >>
  2. Why do banks write off bad debt?

    Learn more about the practice of banks writing off bad debts and removing them from their books, including a hypothetical ... Read Answer >>
  3. If there are two plans and one is terminated, creating a distributable event, can ...

    It depends. If the loan is in good standing - the participant did not default on the loan and the loan meets other statutory ... Read Answer >>
  4. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  5. What are the pros and cons of life insurance policy loans?

    Find out the pros and cons of borrowing against your life insurance policy to help you decide if this loan type is the right ... Read Answer >>
  6. What are the pros and cons of consolidating my student loans?

    Read about the possible advantages and disadvantages of consolidating your student loan debts, and find out how to determine ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center