What Is a 'Loan Loss Provision'?

Loan loss provisions, also known as valuation allowances, are an expense set aside as an allowance for potential uncollected loans and loan payments. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

Term of the Day | Words to Know Loan Loss Provision A loan loss provision is an income statement expense set aside as an allowance for uncollected loans and loan payments. This provision is used to cover different kinds of loan losses such as non-performing loans, customer bankruptcy, and renegotiated loans that incur lower-than-previously-estimated payments. Loan loss provisions are then added to the loan loss reserves, a balance sheet item that represents the total amount of loan losses subtracted a company's loans. Read More » Related to "Loan Loss Provision" What You Need to Know About Fannie Mae Loans Fannie Mae (officially the Federal National Mortgage Association) stimulates homeownership and expands the liquidity of the mortgage market. Read More » APR vs APY: What Is APR and How It Differs from APY Learn the difference between annual percentage rate and annual percentage yield, how to calculate them, and why your bank hopes that you can't tell the difference. Read More » SPONSORED BY BASK BANK The Best Way to Save on Future Travel from our friends at The Balance Having goal-specific savings can help you make the most of your money. This new savings account could be the key to saving for your future dream vacation. Learn More » The Special Economic Impact of Pandemics As governments around the world limit the mobility of their people, most experts agree that a significant drop in economic output is inevitable. Read More » Sign Up for 'The Market Sum' Want more Investopedia market news? Editor in Chief, Caleb Silver is here to you help you digest the days market moving events at the close of the bell. Subscribe» Related Definitions Loan A loan is money, property, or other material goods given to another party in exchange for future repayment of the loan value amount with interest. Read More » Default Default happens when a borrower fails to repay a portion or all of a debt including interest or principal. Read More » Dodd-Frank Wall Street Reform and Consumer Protection Act The Dodd-Frank Wall Street Reform and Consumer Protection Act is a series of federal regulations passed in an attempt to prevent a future financial crisis. Read More » Charge-Off A charge-off is a debt, for example on a credit card, that is deemed unlikely to be collected by the creditor because the borrower has become substantially delinquent after a period of time. Read More » CONNECT WITH INVESTOPEDIA Email sent to: mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here. 114 West 41st St, floor 8 New York NY 10036 © 2020, Investopedia, LLC, All Rights Reserved | Privacy Policy