Cap And Collar

What is Cap and Collar?

Cap and Collar is a term used in connection with interest rates. A Cap is an upper limit, or maximum interest rate that will apply. A Collar is the lower limit, or minimum interest rate that will apply.

The actual interest rate charged can vary between the Cap and the Collar, but will never exceed the cap, or fall below the collar. This type of interest rate mechanism gives a borrower more certainty than a fully variable interest rate.


Q: What is the Floor?

A: The Floor in relation to a Cap and Collar is an interest rate minimum charge is a term used in connection with interest rates. A cap is an upper limit, or maximum interest rate that will apply. A collar is the lower limit, or minimum interest rate that will apply.

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