- The difference between the interest rate charged to borrowers and the interest rate paid to depositors.
rate spread, interest rate spread
Related Terms and Acronyms
- Annual Percentage Rate (APR) — Acronym, Very Important,
➥ A number used to compare costs associated with mortgage loans and other forms of financing.
- A yearly rate of interest that includes fees and costs paid to acquire the loan. Lenders are required by law to disclose the APR. The rate is calculated in a standard way, taking the average compound interest rate over the term of the loan, so borrowers can compare loans. In mortgages, it is the interest rate of a mortgage when taking into account the interest, mortgage insurance, and certain closing costs including points paid at closing. There is no APR in an automobile lease; instead, the cost of money is expressed as the money factor.
- Bank — Definition,
- An institution that acts as a financial intermediary by receiving money from depositors and lenders and also lending to borrowers.
- Bank Spread — Definition,
- The difference between the interest rate a bank charges a borrower and the interest rate a bank pays a depositor.
- Borrow — Definition,
- To get a loan of money.
- Sand, gravel or other material used for grading; a slope.
- Borrower — Definition,
- A person who borrows money or obtains a loan.
- Debtor — Definition,
- Anyone who owes money to a creditor.
- A person who has filed a petition for relief under the bankruptcy laws.
- Interest Rate (IR) — Acronym, Very Important,
- The rate a lender charges an individual to borrow money.
- Lender — Definition,
- The bank or mortgage company offering the loan.
- Loan — Definition,
- Letting another party use something of value temporarily.
- Margin — Definition,
- Expressed as percentage points, the amount that a lender adds to an index to arrive at the final interest rate. For example, if the index is 9 percent and the margin 2.75 percent, the final interest rate is 11.75 percent.
- The difference between the cost and the selling price.
- Point — Definition,
- A point equals 1 percent of a mortgage loan. Some lenders charge "origination points" to cover expenses of making a loan. Some borrowers pay "discount points" to reduce the loan's interest rate.
- Rate Index — Definition,
- A table of yields or interest rates being paid on debt (such as Treasury notes or bank deposits) that is used to determine interest-rate changes for adjustable-rate mortgages and other variable-rate loans.