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.

BREAKING DOWN '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. Check

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

    Property or other assets that a borrower offers a lender to secure ...
  3. Savings Account

    A deposit account held at a bank or other financial institution ...
  4. Loan

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

    A financial institution licensed as a receiver of deposits. There ...
  6. Profit Margin

    A category of ratios measuring profitability calculated as net ...
Related Articles
  1. Retirement

    Tired Of Banks? Try A Credit Union

    These nonprofit organizations can provide a range of services for lower fees.
  2. Credit & Loans

    The Evolution Of Banking

    Banks are a part of ancient history. Find out how this system of money management developed into what we know today.
  3. Options & Futures

    Choose To Beat The Bank

    From internet banking to credit unions, it's in your power to cut fees and maximize service.
  4. Options & Futures

    Savings Accounts Not Always The Best Place For Cash Assets

    Money market funds may be all that stands between you and increasing your wealth.
  5. Options & Futures

    Demystification Of Bank Accounts

    Find out which type of account suits your specific needs.
  6. Investing

    How To Calculate Minority Interest

    Minority interest calculations require the use of minority shareholders’ percentage ownership of a subsidiary, after controlling interest is acquired.
  7. Credit & Loans

    Can Corporate Credit Cards Affect Your Credit?

    Corporate cards have a hidden downside. If the company fails to pay its bills, you could be liable for the amount and end up with a damaged credit rating.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI South Africa

    Learn more about the iShares MSCI South Africa fund, which is an NYSE-listed exchange-traded fund offered and managed by BlackRock.
  9. Home & Auto

    4 Areas to Consider Roofing Material Types

    Roofing your home is very important, that’s why you should choose a roof specifically designed to handle your area’s climate.
  10. Mutual Funds & ETFs

    ETF Analysis: WisdomTree SmallCap Earnings

    Discover the WisdomTree Small Cap Earnings ETF, a fund with a special focus on small-cap and micro-cap stocks with positive earnings.
RELATED FAQS
  1. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  2. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  3. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  4. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  5. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  6. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  2. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  3. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  4. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  5. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
  6. Marlboro Friday

    A reference to Friday, April 2, 1993, when Philip Morris, the maker of Marlboro cigarettes, announced that it would be cutting ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!