Libor vs Prime Rate - The Strategic CFO®

Libor vs Prime Rate

Other Category: Banking / Financing, Economics

April 23, 2008
Dan
index, interest rate, interest rates, LIBOR, loan agreement, prime rate

Interesting article in the April 23rd Wall Street Journal on page C1 highlighting the divergence of Libor from U.S. Prime Rate. Let’s dive into what the difference between Libor vs Prime Rate is.

What’s the Difference Between Libor vs Prime Rate?

Libor has been increasing while the Prime Rate has been dropping.
You need to check your loan agreement to see what is the index for setting your loan rate. Now is also a good time to see if there is a floor on your interest rate. I have had clients in the past who woke up to find that the prime rate had fallen significantly but their interest rate had a floor on it. You can often negotiate that floor away.
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