What is Interest Rate Spread on Home Loan EMI
Channel: LoanEasy
Date: 2016-12-17

The net interest rate spread is the difference between the average yield a financial institution receives from loans and other interest-accruing activities and the average rate it pays on deposits and borrowings.
In simple terms, the net interest spread is like a profit margin. The greater the spread, the more profitable the financial institution is likely to be; the lower the spread, the less profitable the institution is likely to be.

Read more: Net Interest Rate Spread Definition | Investopedia
A difference or spread between two related interest rates occurs in many types of business or finance transactions. As it relates to your business, a spread could be relevant if you are borrowing money or if your business involves lending or arranging for loans for your customers. As it relates to small business, a rate spread could be an expense or source of profit.

For any business that lends money, the interest rate spread is what the company charges on a loan compared to its cost of money. A bank runs on interest rate spreads, paying a certain rate on savings and CD deposits and making loans at higher rates than it pays to savers. Publicly traded financial companies such as banks often report the net interest rate spread earned on quarterly and annual financial reports. The World Bank supplies interest rate spread data from countries around the world showing the difference between the average lending rate and deposit rate.