Problem Loan

AAA

DEFINITION of 'Problem Loan'

In the banking industry, a problem loan is one of two things; it can be a commercial loan that is at least 90 days past due, or a consumer loan that it at least 180 days past due. This type of loan is also referred to as a nonperforming asset.

INVESTOPEDIA EXPLAINS 'Problem Loan'

The subprime mortgage meltdown and 2007-2009 recession led to a rise in the number of problem loans that banks had on their books. Several federal programs were enacted to help consumers deal with their delinquent debt, most of which focused on mortgages. Problem loans can often result in property foreclosure, repossession or other adverse legal actions.

RELATED TERMS
  1. Problem Loan Ratio

    A ratio in the banking industry that denotes the percentage of ...
  2. Credit Score

    A statistically derived numeric expression of a person's creditworthiness ...
  3. Creditor

    An entity (person or institution) that extends credit by giving ...
  4. Default

    1. The failure to promptly pay interest or principal when due. ...
  5. Credit

    1. A contractual agreement in which a borrower receives something ...
  6. Loan

    The act of giving money, property or other material goods to ...
RELATED FAQS
  1. Why would you use the TTM (trailing twelve months) rather than the data from the ...

    Public companies report their yearly financial statements along with an annual report. However, financial professionals are ... Read Full Answer >>
  2. How do government bailouts increase moral hazard?

    Government bailouts increase moral hazard by engendering a business climate in which companies feel they will be protected ... Read Full Answer >>
  3. Why is it important for an investor to understand business accounting?

    Investors use financial statements to obtain valuable information used in valuation and credit analysis of companies. Therefore, ... Read Full Answer >>
  4. What are the business consequences of using FIFO vs. LIFO accounting methods?

    If a company uses a first-in, first-out accounting method (FIFO), it's likely that its reported earnings will be higher than ... Read Full Answer >>
  5. How do you analyze inventory on the balance sheet?

    In accounting, inventory represents a company's raw materials, work in progress and finished products. Financial professionals ... Read Full Answer >>
  6. What techniques can be used to hedge exposure to the chemicals sector?

    An investor can hedge exposure to the chemicals sector in two ways. Because the sector is cyclical, an investor can allocate ... Read Full Answer >>
Related Articles
  1. Retirement

    How To Invest When You're Deep In Debt

    Debt is one of the biggest obstacles that prevents people from investing - but it shouldn't be.
  2. Personal Finance

    Promissory Notes: Not Your Average IOU

    These may be a handy way to borrow money, but this convenience does not come without risk.
  3. Credit & Loans

    Digging Out Of Personal Debt

    Find out why good intentions can put consumers in an even bigger hole than before.
  4. Home & Auto

    Reverse Mortgage Pitfalls

    Before tapping your home equity, find out what can go wrong.
  5. Options & Futures

    Payday Loans Don't Pay

    Hold too tightly to this rescue line and you'll soon be drowning in debt.
  6. Fundamental Analysis

    What is Quantitative Analysis?

    Quantitative analysis refers to the use of mathematical computations to analyze markets and investments.
  7. Economics

    Explaining Residual Value

    Residual value is a measurement of how much a fixed asset is worth at the end of its lease, or at the end of its useful life.
  8. Personal Finance

    Weak Oil, Sanctions' Bite, Mean Misery for Russia

    Low oil prices, coupled with crippling sanctions, will mean Russia will suffer declining growth and vicious inflation for at least the next two years.
  9. Fundamental Analysis

    Why Last In First Out Is Banned Under IFRS

    We explain why Last-In-First-Out is banned under IFRS
  10. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center