Interest Rate Spread
What does it mean
An Interest Rate Spread refers to the difference between an interest rate index and the borrower’ rate. An example would be Wall Street Journal Prime + 1.25%. The Spread in this example would be +1.25%.
Why does it matter
Interest Rate Spread matters because as with anything that has to do with loan structuring, the specifics are only restricted by your level of creativity and ability to negotiate. Interest Rate Spreads can extend for the life of the loan or for only a certain period of time. Interest Rate Spreads can even be negotiated to change over time.
Other Relevant Terms
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