- A prime loan is a loan that is made to a borrower with a good credit history and low default risk.
- Prime loans are typically the lowest-risk loans that a lender can make, and they are often used as the underlying assets in securitisations.
There are a number of benefits to using prime loans in securitisations, including:
- Low default risk: Prime loans have a low default risk, which means that the securitisation is less likely to lose money.
- High liquidity: Prime loans are typically very liquid, which means that they can be easily sold on the secondary market.
- Strong credit ratings: Prime loans typically have strong credit ratings, which makes them attractive to investors.
Here are some applications of prime loans in securitisation:
- To reduce risk: Securitisations that are backed by prime loans are typically less risky than securitisations that are backed by other types of loans.
- To increase liquidity: Securitisations that are backed by prime loans are typically more liquid than securitisations that are backed by other types of loans.
- To improve credit ratings: Securitisations that are backed by prime loans can often achieve higher credit ratings than securitisations that are backed by other types of loans.
Prime loans are an important asset class in securitisation, and they can be used to create a variety of securitisation products.