The prime rate of interest is a rate of interest that serves as a benchmark for most loans in a country.
The rate is almost always the same amongst major banks. Adjustments to the federal prime rate are made by banks at the same time; although, the prime rate does not adjust on any regular basis.
In the United States, the prime rate is the interest rate banks charge to large corporations for short-term loans. For most of us the prime rate means variable interest rate at which banks borrow from each other.
Lenders will often use the prime rate plus or minus a percentage to determine the variable interest rate of a private loan.
The prime rate is typically 2-3 percentage points higher than the Federal Funds rate.
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