Nonperforming Loan - NPL

AAA

DEFINITION of 'Nonperforming Loan - NPL'

A sum of borrowed money upon which the debtor has not made his or her scheduled payments for at least 90 days. A nonperforming loan is either in default or close to being in default. Once a loan is nonperforming, the odds that it will be repaid in full are considered to be substantially lower. If the debtor starts making payments again on a nonperforming loan, it becomes a reperforming loan, even if the debtor has not caught up on all the missed payments.

INVESTOPEDIA EXPLAINS 'Nonperforming Loan - NPL'

Institutions holding nonperforming loans in their portfolios may choose to sell them to other investors in order to get rid of risky assets and clean up their balance sheets. Sales of nonperforming loans must be carefully considered since they can have numerous financial implications, including affecting the company's profit and loss, and tax situations.

RELATED TERMS
  1. Nonaccrual Loan

    A nonperforming loan that is not generating the stated interest ...
  2. Reperforming Loan - RPL

    A loan on which the borrower was behind on payments (delinquent) ...
  3. Renegotiated Loan

    The result of an agreement between a borrower and a lender to ...
  4. Cash Basis Loan

    A loan where interest is recorded as earned when payment is collected. ...
  5. Default

    1. The failure to promptly pay interest or principal when due. ...
  6. Texas Ratio

    A ratio developed by Gerald Cassidy and other analysts at RDC ...
RELATED FAQS
  1. How is my credit score calculated?

    The credit score, commonly referred to as a FICO score, is a proprietary tool created by the Fair Isaac Corporation. This ... Read Full Answer >>
  2. What are Manchester United's (MANU) largest revenue sources?

    Manchester United is one of the most popular U.K. soccer teams. Its principal stadium is Old Trafford, located in the heart ... Read Full Answer >>
  3. How does the use of International Financial Reporting Standards (IFRS) affect key ...

    While much has been achieved since 2002 in convergence between international financial reporting standards (IFRS) and U.S. ... Read Full Answer >>
  4. What is the justification for allowing deferred tax liabilities?

    A deferred tax liability tracks the temporary difference that arises between a company's income taxes that will be due in ... Read Full Answer >>
  5. How is overhead distributed through total absorption costing?

    Through total absorption costing, overhead is distributed into indirect costs incurred from the manufacturing and production ... Read Full Answer >>
  6. How is liquidity risk captured by the cash conversion cycle (CCC)?

    Liquidity risk is captured by the cash conversion cycle (CCC) through the use of days inventory outstanding, days sales outstanding ... Read Full Answer >>
Related Articles
  1. Personal Finance

    Texas Ratio Rounds Up Bank Failures

    This measure can help investors spot potential trouble in a bank's financials. Find out how.
  2. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  3. Home & Auto

    The Benefits Of Mortgage Repayment

    Buying a home may be the biggest debt you'll ever incur. Learn why you should retire it sooner, rather than later.
  4. Investing Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.
  5. Investing

    Apple or Google: Which is the Better Bet?

    Apple and Google have made many investors rich since the turn of the century. Which is more appealing going forward?
  6. Economics

    What is Involved in Inventory Management?

    Inventory management refers to the theories, functions and management skills involved in controlling an inventory.
  7. Economics

    What are Noncurrent Assets?

    Noncurrent assets are property that a company owns that will last for more than one year.
  8. Fundamental Analysis

    How Microsoft & Apple's Balance Sheets Compare

    Looking at two iconic companies, Microsoft and Apple, whose balance is sheet is stronger and where?
  9. Economics

    Explaining Activity-Based Costing

    Activity-based costing (ABC) is a managerial accounting method that assigns certain indirect costs to the products incurring the bulk of those costs.
  10. Economics

    What is a Contra Account?

    A contra account is an offset that reduces the value of a related account.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center