Spread
Also known as: Margin, Risk Premium
Additional margin charged by banks over the benchmark rate to determine your final loan interest rate.
Detailed Explanation
Spread is the bank's margin added to the benchmark rate (repo, MCLR, etc.) to arrive at your final loan rate. For example, if repo rate is 6.5% and your spread is 2.25%, your final rate is 8.75%. Spread depends on credit profile, loan amount, LTV ratio, bank relationship, and market competition. While benchmark rates change with RBI policy, spreads are negotiable and can be revised based on improved creditworthiness or relationship banking.
Related Calculators
Related Terms
Repo Rate
Rate at which RBI lends money to commercial banks against government securities as collateral.
MCLR
Marginal Cost of Funds based Lending Rate - Internal benchmark used by banks for loan pricing.
RLLR
Repo Linked Lending Rate - External benchmark for loan interest rates linked to RBI repo rate.