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Loan Sharks What is a loan shark? A loan shark is an illegal lender who provides credit at extremely high interest rates and often uses threats or violence to collect debts. These lenders frequently operate outside regulated financial systems and may be connected to organized crime. How loan sharks operate Provide cash quickly with little…

Understanding Loan Servicing: Definition, Process, and Market Dynamics Loan servicing is the administrative management of a loan from disbursement until it is fully repaid. It includes collecting payments, managing escrow accounts, maintaining records, handling delinquencies, and communicating with borrowers. Servicing can be performed by the original lender, a specialized non-bank servicer, or a third-party vendor….

Loan Production Office (LPO): Meaning and How It Works Overview A loan production office (LPO) is an administrative unit of a bank that handles lending-related activities but is not authorized to make loan decisions. LPOs serve as public, staffed facilities that provide information, assist with applications, collect documentation, and prepare loan files for final review…

Loan Participation Note (LPN) A loan participation note (LPN) is a fixed-income instrument that gives investors a claim on a portion of an outstanding loan or a package of loans. Holders receive interest and principal payments on a pro‑rata basis and share proportionally in the credit risk, including the risk of borrower default. Key takeaways…

Loan Officer A loan officer is a representative of a bank, credit union, or other financial institution who helps borrowers apply for loans and guides them through approval and closing. Loan officers are often associated with mortgages—the most complex consumer loans—but they also work with personal, auto, student, business, and other loan types. Key takeaways…

Loan Note Definition A loan note is a written promissory agreement that records the terms of a loan between a borrower and a lender. It sets out the principal amount, interest rate, repayment schedule, maturity date, and remedies for default. When used with real property, a loan note is often paired with a mortgage or…

Loan Modification A loan modification is a permanent change to the terms of an existing loan intended to make repayment more manageable for a borrower in financial distress. Modifications commonly adjust the interest rate, extend the repayment term, convert the loan type, or combine several of these changes. How it works Lenders agree to modify…

Loan Loss Provision A loan loss provision is an expense a bank records to cover expected losses from unpaid loans or defaults. It reduces reported operating profit and increases a reserve on the balance sheet so the bank’s financial statements more accurately reflect credit risk. Key takeaways * A loan loss provision is recorded on…

Loan Lock: What It Means and How It Works Key takeaways A loan lock (rate lock) guarantees a mortgage interest rate for a specified period, protecting the borrower from rate increases during that time. Locks usually last 30, 45, or 60 days and may incur a fee or a slightly higher rate. Optional features—such as…

Loan Life Coverage Ratio (LLCR) What is LLCR? The Loan Life Coverage Ratio (LLCR) measures a project’s or borrower’s ability to repay outstanding debt by comparing the net present value (NPV) of cash flows available for debt service over the remaining life of the loan to the outstanding loan balance. It is widely used in…

Loan Grading: What It Is and How It Works Loan grading is a classification system that assigns a quality score to an individual loan or a portfolio of loans based on the borrower’s creditworthiness, the quality of collateral, and the likelihood of repayment of principal and interest. It is a core component of a lender’s…

Loan Credit Default Swap Index (Markit LCDX) Overview The Markit LCDX is a loan-only credit default swap (CDS) index covering 100 North American companies with unsecured debt that trades in broad secondary markets. IHS Markit publishes the index, which is traded over the counter (OTC) and supported by a consortium of large investment banks that…

Loan Credit Default Swap (LCDS) Key takeaways An LCDS is a credit derivative that transfers the credit risk of a syndicated secured loan from one party to another in exchange for premium payments. Structurally it is like a standard credit default swap (CDS), but the reference obligation is limited to syndicated secured loans. LCDS typically…

Loan Constant A loan constant is the annual debt service on a loan expressed as a percentage of the loan principal. It shows how much a borrower pays each year (principal + interest) relative to the original loan amount. Loan constants apply to fixed-rate loans and are commonly used to compare borrowing costs and to…

Loan Committee: Role and How It Evaluates Loan Quality What is a loan committee? A loan committee is a group of senior managers at a bank or lending institution tasked with approving, modifying, or rejecting loan requests that exceed the approval authority of frontline loan officers. Committees typically include senior executives (for example, the chief…

Loan commitment: definition, how it works, and types A loan commitment is a formal promise by a financial institution to lend a borrower a specified amount of money under agreed terms. It can be issued as a single lump-sum loan (closed-end) or as an open-end arrangement—a line of credit that the borrower can draw on…

Loan Application Fee Key takeaways * A loan application fee is an up-front, usually nonrefundable charge for processing a loan application. * Fees vary widely by lender and loan type—many lenders charge nothing, while others charge up to several hundred dollars. * Compare lenders, check your credit, and negotiate where possible to avoid or reduce…

What Is a Loan? How It Works, Types, and Tips for Borrowers A loan is a transfer of money from a lender to a borrower with an agreement that the borrower will repay the principal plus interest and any fees. Loans fund purchases, business activity, investments, and emergencies. They come in many forms—one-time term loans,…

Load Fund: What It Means and How It Works A load fund is a mutual fund that charges a sales commission—called a load—to compensate the intermediary (broker, financial planner, or advisor) who sells or recommends the fund. Loads affect how much of an investor’s money is actually invested and can take different forms depending on…

Load: What it means, types, and considerations A load is a sales charge or commission paid by an investor when buying or redeeming shares in a mutual fund. Loads compensate intermediaries (brokers, financial advisers, or distributors) for marketing and distribution. Mutual funds disclose sales-charge schedules in their prospectuses and structure them by share class. How…

Lloyd’s of London: The Evolution of a Premier Insurance Marketplace Introduction Lloyd’s of London is a global marketplace for insurance and reinsurance, not an insurance company itself. Founded in a 17th‑century London coffeehouse, it has evolved into a specialized market where syndicates—groups of capital providers—underwrite risks that may be difficult to place in traditional insurance…

LLC Operating Agreement Key takeaways * An LLC operating agreement is a binding internal document that defines how a limited liability company is owned, managed, and run. * It clarifies ownership percentages, voting and management rights, profit/loss allocation, and procedures for adding or removing members. * Many states don’t require one, but it’s strongly recommended;…

Living Will: Definition, Purpose, and How to Make One What is a living will? A living will (also called an advance directive) is a legal document that records the medical care you want—or do not want—if you become unable to communicate decisions. It guides doctors, nurses, and loved ones about life-sustaining treatments and other end-of-life…

Living Wage: Definition, History, and How to Calculate A living wage is the level of income needed for individuals or families to afford basic necessities—housing, food, healthcare, childcare, transportation, taxes and modest savings—without falling into poverty. It is intended to cover a decent standard of living and typically assumes no more than about 30% of…

Living Trust What is a living trust? A living trust (also called an inter vivos trust) is a legal arrangement created during a person’s lifetime to hold and manage assets for beneficiaries. The person who creates the trust (the grantor) transfers title of selected assets into the trust, names a trustee to manage them, and…

Listing Requirements: What They Are and How They Work Listing requirements are the criteria established by stock exchanges that companies must meet to have their shares traded on those exchanges. Exchanges set these standards to protect investors, ensure adequate liquidity, and preserve the exchange’s reputation. Companies that do not meet an exchange’s standards can still…

Listing Agreement: Definition, How It Works, and Types Key takeaways * A listing agreement is a contract in which a property owner (seller) hires a real estate broker (agent) to find a buyer and represent the seller’s interests. * It is an employment contract, not a conveyance of property; no transfer of title occurs between…

Listed Security Key takeaways * A listed security is a financial instrument—stock, bond, or derivative—traded on a regulated exchange. * Issuers must meet an exchange’s listing requirements and ongoing disclosure obligations. * If an issuer fails to comply, the security can be delisted and may trade over the counter (OTC). What is a listed security?…

Listed Property: Tax Deductions and Depreciation Rules What is listed property? * Listed property is tangible property that can be used for both business and personal purposes (for example, passenger automobiles, many transportation vehicles, and equipment generally used for entertainment, recreation, or amusement). * The IRS treats these items specially because mixed personal/business use creates…

Listed Option (Exchange-Traded Option) Key takeaways * A listed option—also called an exchange-traded option—is a standardized derivative contract traded on an exchange and guaranteed through a clearinghouse. * It gives the buyer the right (but not the obligation) to buy (call) or sell (put) a set quantity of an underlying asset at a specified strike…

What is a listed company? A listed company is a public company whose shares are approved for trading on a stock exchange (for example, the New York Stock Exchange or Nasdaq). Listing requires meeting exchange-specific standards and complying with securities regulations, including regular disclosure of quarterly and annual financial reports. Once listed, a company’s shares…

Lisbon Treaty: History, Impact and Opinions The Lisbon Treaty (Treaty of Lisbon) reorganized how the European Union (EU) functions, strengthening central institutions, clarifying foreign policy roles, formalizing an exit procedure, and streamlining decision-making. Signed in Lisbon on December 13, 2007, it amended existing EU treaties and came into force in December 2009. Background The Lisbon…

Lis Pendens A lis pendens is a public notice that a lawsuit affecting the title or ownership of real property is pending. It warns prospective buyers and other interested parties that the property is subject to litigation and that any sale or transfer may be affected by the outcome. The term is Latin for “suit…

Liquefied Natural Gas (LNG): What It Is and How It Works What is LNG? Liquefied natural gas (LNG) is natural gas cooled to approximately -260°F (-162°C) until it becomes a clear, colorless, non-toxic liquid. Liquefaction reduces natural gas volume to about 1/600th of its gaseous state, making long-distance transport and storage practical where pipelines are…

Liquidity trap Overview A liquidity trap occurs when consumers, businesses, and investors hoard cash instead of spending or investing, even though interest rates are very low or near zero. In this situation conventional monetary policy—cutting short-term interest rates—loses its power to stimulate demand, and economic activity can stagnate. Key features and indicators Very low nominal…