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Prime Rate

The rate of interest that banks charge their most creditworthy customers.

A bank's prime rate can be based on what it costs the bank itself to borrow money from the Federal Reserve, or it may take other factors into consideration.

In Europe, LIBOR is one of the indicators used to determine prime rate.  EURIBOR is another reference used in today's lending market.

Every bank has a set minimum amount for prime rate loans.  For loans of less than that minimum amount, a bank will charge prime rate plus added interest, thus the phrase "Prime + 1" in this case meaning the interest charged will be the bank's prime rate plus 1%.

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