2 min read
Definition
An interest rate differential measures the difference between two rates — commonly your loan rate and the reference rate, which reveals your margin. It also underpins how breakage costs are calculated when a fixed rate is unwound against current market rates.
In plain terms
It is the spread between one rate and another — the space where your margin lives, and where break costs are worked out.
Why it matters for your company
Knowing the differential between your rate and the benchmark tells you if your margin is competitive. See credit margin.
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Breakage cost
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Read →Funding for UK limited companies
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