Loose Credit

Dictionary Says

Definition of 'Loose Credit'


The practice of making credit easy to come by, either through relaxed lending criteria or by lowering interest rates for borrowing. Loose credit often refers to central banking monetary policy and whether it is looking to expand the money supply (loose credit) or contract it (tight credit).

Loose credit environments may also be called "accommodative monetary policy" or "loose monetary policy".

Investopedia Says

Investopedia explains 'Loose Credit'


The U.S. markets were considered a loose credit environment between 2001 and 2006, as the Federal Reserve lowered the Fed funds rate, and interest rates reached their lowest levels in more than 30 years. This allowed the economy to expand, as more people were able to borrow. This led to increased asset investment and spending on goods and services.

Central banks differ on the mechanisms they have at their disposal to create loose or tight credit environments. Most have a central borrowing rate (such as the Fed funds rate or discount rate) that affects the largest banks and borrowers first; they in turn pass the rate changes along to their customers. The changes eventually work their way down to the individual consumer via credit card interest rates, mortgage loan rates and rates on basic investments like money market funds and certificates of deposit (CDs).

comments powered by Disqus
Hot Definitions
  1. Closed-End Fund

    A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange.
  2. Payday Loan

    A type of short-term borrowing where an individual borrows a small amount at a very high rate of interest. The borrower typically writes a post-dated personal check in the amount they wish to borrow plus a fee in exchange for cash.
  3. Securitization

    The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors.
  4. Economic Forecasting

    The process of attempting to predict the future condition of the economy. This involves the use of statistical models utilizing variables sometimes called indicators.
  5. Chicago Mercantile Exchange - CME

    The world's second-largest exchange for futures and options on futures and the largest in the U.S. Trading involves mostly futures on interest rates, currency, equities, stock indices and agricultural products.
  6. Private Equity

    Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity.
Trading Center