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Understanding WSJ Prime Rate
Many Commercial lenders use the WSJ Prime rate as the base rate for commercial lending. I get questions almost every time a loan is structured using the "Prime Rate" Here is a bit of insight to understanding our "Prime Rate" and why it is used.
The Wall Street Journal prime rate is the rate set by then Federal Open Market Committee for short-term interest rates for the banking industry of the United States.  Many different types of lending institutions use this rate as a foundation for the rates that they charge for short-term loan products.  This allows the lending institutions to use a base rate to set a competitive price that will be profitable for the company and allows consumers to compare similar loan products from competing lending institutions to determine which one is the best value.
The Wall Street Journal prime rate is printed in the Eastern print edition of the newspaper and is considered to be the standard across the nation.  If the "Prime Rate" is mentioned by a newspaper, investor, or economist, they are typically referring to this rate.  The rate was traditionally determined by gathering information from 30 of the largest banking institutions and changed when 23 ... more

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