What is Prime Plus Spread (Rate)?

Prime plus spread, also known as prime rate or prime lending rate, refers to the interest rate that banks charge their most creditworthy customers for loans or lines of credit. The prime rate is typically based on the federal funds rate, which is the interest rate at which banks lend money to each other overnight.

The prime rate is considered the base rate for many types of loans, and lenders may add a “spread” or “margin” to the prime rate to determine the interest rate they charge for loans. For example, a lender may offer a loan with an interest rate of prime plus 2%, which means that the interest rate on the loan would be the prime rate plus an additional 2%.

Prime Rate Spread means the additional component of interest, expressed as a percentage per annum, to be added to the Prime Rate in determining the applicable rate of interest for Prime Rate Loans.