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Underwater loan

Underwater loan Definition

A loan that, if sold, would be worth less than its current book value. Loans "sink" underwater because: (1) payments are delinquent, or (2) the loan's interest rate is below current market rates for similar loans of similar maturity, or (3) the collateral of a delinquent loan has decreased in value below the amount of outstanding principal.

RELATED TERMS
Book value
Loan







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