Passbook Loan

AAA

DEFINITION of 'Passbook Loan'

A personal loan extended to a savings-account holder by the custodial bank. Passbook loans use the balance of the savings account as collateral for the loan. The amount of the loan therefore cannot exceed the savings-account balance.

INVESTOPEDIA EXPLAINS 'Passbook Loan'

Passbook loans are considered low-risk transactions due to the accessibility of their collateral to the lender. The borrower must hand over the passbook to the bank until the loan is repaid. The bank can also simply place a hold on the funds in the savings account up to the amount of the loan.

RELATED TERMS
  1. Bank

    A financial institution licensed as a receiver of deposits. There ...
  2. Check

    A written, dated and signed instrument that contains an unconditional ...
  3. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  4. Loan

    The act of giving money, property or other material goods to ...
  5. Savings Account

    A deposit account held at a bank or other financial institution ...
  6. Book Value Reduction

    Reducing the value at which an asset is carried on the books ...
Related Articles
  1. Tired Of Banks? Try A Credit Union
    Retirement

    Tired Of Banks? Try A Credit Union

  2. The Evolution Of Banking
    Credit & Loans

    The Evolution Of Banking

  3. Choose To Beat The Bank
    Options & Futures

    Choose To Beat The Bank

  4. Savings Accounts Not Always The Best ...
    Options & Futures

    Savings Accounts Not Always The Best ...

comments powered by Disqus
Hot Definitions
  1. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  2. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  3. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  4. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
  6. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
Trading Center