Interest Rate Collar


Definition of "Interest rate collar"

Sandra  Juliano real estate agent
Sandra Juliano, Real Estate Agent Berkshire Hathaway Homesservices

Combination of an interest rate cap and an interest rate floor, creating a band within which interest rates can range. For example, if an interest rate band is between 6% and 10%, the insurance company does not receive or pay a continuous stream of interest payments from or to another party within this band. Above the upper limit on the maximum possible interest rate an insurance company will pay, and below the lower limit of the maximum possible interest rate an insurance company will pay, the insurance company and another party will exchange interest payments.

 

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