Floating-Rate Loan

Floating-rate loan is a loan whose stated interest rate resets against a benchmark or other contractual formula. Changes in benchmark rates may change income, subject to floors, caps, and borrower performance.

Why this matters to income investors

Rate changes can alter interest received and, for a leveraged lender, interest paid. Compare both sides before assuming that higher rates improve earnings.

How to use floating-rate loan in your research

Check when the asset income and borrowing costs reset. A rate change can reach each side at a different time, so compare the net effect on the earnings used to fund distributions.

This material is general education and information, not individualized investment, tax, or legal advice.