The full form of PLR is Prime Lending Rate.
The Prime Lending Rate (PLR) is a benchmark interest rate that commercial banks use to establish interest rates for various loans and credit products offered to their customers. It essentially represents the interest rate that banks offer to their most creditworthy clients. Though less commonly used today, it historically served as a base rate from which other lending rates were derived.
Here's a breakdown of what that means:
- Reference Rate: The PLR acts as a reference point. Banks typically add a margin or spread to the PLR to determine the actual interest rate charged to different borrowers based on their credit risk and other factors.
- Creditworthiness: The PLR is theoretically the rate offered to customers with the highest credit rating, indicating minimal risk of default.
- Historical Significance: While still existing in some contexts, the PLR has largely been replaced by other benchmarks like the LIBOR (London Interbank Offered Rate) or specific Treasury rates, plus a spread.
In summary, the Prime Lending Rate is the baseline interest rate that banks historically used as a foundation for pricing various loans, reflecting the rate offered to their most reliable borrowers.
