1. A classification for a loan that is expected to result in a loss of interest for the lender, because the borrower is unlikely to be able to completely pay back the loan for some reason. A lender will occasionally agree to a substandard loan even though it means some revenue will be lost, because typically no principal is lost on a substandard loan, only some interest. 2. A broad designation that can be used to indicate that any given thing is below the acceptable level or standard.