DEFINITION of 'Problem Loan Ratio'

A ratio in the banking industry that denotes the percentage of problem loans to sound ones. The problem loan ratio is ultimately a measure of the health of the banking and lending industries and the economy. A higher ratio means a greater number of problem loans and vice-versa.

BREAKING DOWN 'Problem Loan Ratio'

The problem loan ratio can be broken down by the level of delinquency of loans, such as those less than 90 days past due versus those more severely in arrears. This ratio increased across the board during the 2007-2009 recession and subprime fallout. This ratio can apply to specific banks, bank branches or the industry as a whole.

RELATED TERMS
  1. Problem Loan

    In the banking industry, a problem loan is one of two things; ...
  2. High Ratio Loan

    A loan of any type for which a relatively small down payment ...
  3. Texas Ratio

    A ratio developed by Gerald Cassidy and other analysts at RDC ...
  4. 125% Loan

    A loan, usually a mortgage, with an initial loan amount equal ...
  5. Key Ratio

    A mathematical ratio that illustrates and summarizes the current ...
  6. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ...
Related Articles
  1. Investing

    Texas Ratio Rounds Up Bank Failures

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

    Bank of America's 3 Key Financial Ratios (BAC)

    Discover some of the key financial ratios that show the quality of Bank of America's loan portfolio and how profitable the bank has been.
  3. Investing

    Analyze Investments Quickly With Ratios

    Make informed decisions about your investments with these easy equations.
  4. Insights

    An Introduction to Government Loans

    Government loans further policymakers' efforts to create positive social outcomes by offering timely access to capital for qualified candidates.
  5. Personal Finance

    Personal Loans: To Lend Or Not To Lend?

    Attempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.
  6. Investing

    What Is Loan-To-Deposit Ratio?

    The loan-to-deposit ratio shows the percentage of a bank’s loans that the bank funds with its deposits.
  7. Personal Finance

    How To Apply For a Personal Loan

    Learn about different avenues for applying for a personal loan, and learn valuable tips to help you get your personal loan application approved.
  8. Personal Finance

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  9. Investing

    Financial Ratios to Spot Companies Headed for Bankruptcy

    Obtain information about specific financial ratios investors should monitor to get early warnings about companies potentially headed for bankruptcy.
  10. Personal Finance

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
RELATED FAQS
  1. How do stock dividends affect the retained earnings account?

    Understand the difference between financial ratio analysis and accounting ratio analysis. Learn why ratio analysis is important ... Read Answer >>
  2. What are the differences between delinquency and default?

    Find out more about loan delinquency, loan default, and the difference between a loan borrower defaulting and being delinquent ... Read Answer >>
  3. What metrics can be used to evaluate companies in the banking sector?

    Learn which metrics are most useful to evaluate companies in the banking sector and associated issues with such metrics when ... Read Answer >>
  4. What is the difference between the capital adequacy ratio and the leverage ratio?

    Explore what differentiates the capital adequacy ratio from any one of several leverage ratios used for equity evaluation ... Read Answer >>
  5. To what extent should you take a company's liquidity ratio into account before investing ...

    Find out how important it is for an investor to know a company's liquidity ratio before deciding to invest, and why relying ... Read Answer >>
  6. How can a company quickly increase its liquidity ratio?

    Discover what high and low values in the liquidity ratio mean and what steps companies can take to improve liquidity ratios ... Read Answer >>
Hot Definitions
  1. Dow Jones Industrial Average - DJIA

    The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange ...
  2. Revolving Credit

    A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is ...
  3. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
  4. Contango

    A situation where the futures price of a commodity is above the expected future spot price. Contango refers to a situation ...
  5. 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 ...
  6. Acid-Test Ratio

    A stringent indicator that indicates whether a firm has sufficient short-term assets to cover its immediate liabilities. ...
Trading Center