Definition

Leveraged Loan

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It is a type of loan that is extended to firms or individuals already having a poor credit history and/or considerable amounts of debt. These loans are substantially riskier than traditional loans and, as such, lenders usually demand a higher interest rate to signify the bigger risk.

Leveraged loans are used to support mergers and acquisitions deals, to refinance the existing debt, to change a company’s balance sheet and for general corporate purposes.