Definition
A bank qualified loan is financing that meets specific criteria allowing the lender to receive favorable tax treatment, which can translate into a lower interest rate for the borrower.
Why It Matters Financially
When an association loan qualifies under these rules, the bank’s tax advantage can be passed through as a reduced rate, lowering the total cost of borrowing for the community.
Example Use Case
An association’s loan is structured as bank qualified, and the resulting lower interest rate saves the community money over the loan term.
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Related Terms
Interest Rate, Association Loan, Loan Term, Debt Service, Lender