Classified Loan

Don’t be confused. You’re not buying a newspaper to check the classified section for ways to borrow money. And stop reading all those cartoons. You have homework to do.

In banking, financial institutions classify any business, municipal, or consumer loan that may default as a “classified loan.”

The bank believes that it won’t be able to collect that money because the borrower’s credit quality has eroded since its approval. These loans have principal and interest outstanding, and the loan no longer meets the lending standards by bank examiners.