LIBOR

Introduction to LIBOR LIBOR is an abbreviated term for London Interbank Offered Rate. What It’s Used For:
  1. LIBOR helps establish lending rates for banks around the world for short-term rates on loans between banks. But it is also used to set terms on interest rates between other lenders and borrowers on variable rate debt (which can run the gamut from corporations seeking loans or individuals applying for credit cards). For example, a credit card is considered variable rate debt because banks can reset rates higher under certain conditions, such as when consumers make several late payments, or after the timeframe of a “promotional rate” expires – or when LIBOR rises. In recent years, as interest rates in the U.S. have gone up, albeit off historical lows, the average rates charged on card borrowings have also gone up, by a few percentage points.
  2. A higher LIBOR generally means higher payments on corporate and consumer loans, credit cards, mortgages, and even complex financial instruments such as interest rate swaps. An interest rate swap would be considered complex because, as a transaction between corporate entities, the terms of the transaction can vary depending on the parties involved and involve both variable and fixed rate interest payments.  
  3. Regardless of complexity, these instruments all have one thing in common: rates can be recalculated over the lifetime of the loan. A lower LIBOR can mean that terms on adjustable rate debt – such as adjustable rate mortgages (ARMs), where rates on outstanding balances can change — can be reset lower, which in turn translates into lower interest payments. For example, a 7/1 ARM is a mortgage that has fixed interest rates in place for the first seven years; the rate can then reset after the seventh year and thereafter is resent annually. If LIBOR is lower when the fixed term ends, the rates can reset lower, saving borrowers money.    
  What It Is LIBOR is a standard interest rate used by international banks when lending to each other over short periods of time—from overnight to as long as one year.   LIBOR is also used as a reference rate for other financial products, including but not limited to credit cards, some personal loans, and some mortgages. How It Is Calculated The Intercontinental Exchange (or ICE, an electronic exchange based in Atlanta and focused on commodities) polls a number of banks representing five currencies —the U.S. dollar, the Euro, the Japanese yen, the British pound sterling, and the Swiss franc — about the rates they would charge other banks for short-term lending activities. These currencies are combined with seven maturities (overnight, one week, one month, two months, three months, six months, and 12 months) to created 35 LIBOR rates. These rates are calculated daily and then collected by a number of banks active in London’s IBA (ICE Benchmark Administration) money market at 11:45AM GMT. Some LIBOR rates are published by various media outlets, predominantly by Thomson Reuters and The Wall Street Journal. Published rates are calculated using a “trimmed mean.”  This method helps blunt the impact of outliers from the polls.  It eliminates the highest and lowest rates on offer from the banks and uses an arithmetic average for the remaining rates – the goal is to smooth out the impact of “extreme” rates that may be offered by banks. Though there are 35 separate LIBOR rates, the rate most often used is the three-month U.S. dollar rate.   Why LIBOR Is Important LIBOR is used by lenders to help them decide what interest rates to charge on everything from mortgages to corporate loans to currency swaps. Essentially, LIBOR is the lowest rate of interest that will be charged on commercial borrowings.   Generally speaking, lenders will use LIBOR to help calculate the rates they will charge, which for variable rate debt (where interest rates may fluctuate over time, such as with credit cards or some student loans) will be recalculated after a set amount of time during the life of the loan. Lenders can and often do often charge an additional rate on top of LIBOR. You may see this rate written as a percentage or basis points. Basis points (bps or bips) are an industry short-hand for discussing rates — 100 basis points equal one percent. This is commonly referred to as “LIBOR plus,” and is how you’ll most commonly see LIBOR used on the YieldStreet platform. In a hypothetical example, a two-year real estate loan has an interest rate of eight percent plus LIBOR. At the time the offering goes live, the LIBOR (note that it is quoted as an annualized rate) rate is two percent. This means the initial total interest rate would be 10 percent. If the LIBOR rate later increases to three percent, the total interest rate would increase to 11 percent.  
How helpful is this content?

Share this article:

Sign up for Yieldstreet in 3 easy steps

Sign up with your email address

Securely verify your identity and link a bank account

Verify your accreditation (if applicable) to access all of Yieldstreet’s offerings.

The Yield

Our weekly podcast providing ideas about how to make money work for you and bring you closer to your dreams.

Since inception, over $1.8B has been invested on Yieldstreet

Join today for free to access alternative investment opportunities.

1 Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in significant losses.

3 "Annual interest" or "Annualized Return" represents an annual target rate of interest or annualized target return and "term" represents the estimated term of the investment. Such target interest or target returns and estimated term are projections of the interest or returns and or term and may ultimately not be achieved. Actual interest or returns and term may be materially different from such projections. This targeted interest or returns and estimated term are based on the underlying investments held by the applicable.

4 Reflects the initial quarterly distribution declared by the board of directors on February 6, 2020, which will be payable to stockholders of record as of June 10, 2020, and the initial offering price of $10 per share.

5 The Fund will cease investing and seek to liquidate the Fund's remaining portfolio no later than 48 months after the Fund's initial closing. It may take up to twelve months thereafter to fully monetize any remaining illiquid investments in the Fund's portfolio.

6 Represents the sum of the interest accrued in the statement period plus the interest paid in the statement period.

7 The internal rate of return ("IRR") represents an average net realized IRR with respect to all matured investments weighted by the investment size of each individual investment, made by private investment vehicles managed by YieldStreet Management, LLC from July 1, 2015 through and including Sept 6th, 2021, after deduction of management fees and all other expenses charged to investments.

8 Investors should carefully consider the investment objectives, risks, charges and expenses of the Yieldstreet Prism Fund before investing. The prospectus for the Yieldstreet Prism Fund contains this and other information about the Fund and can be obtained by emailing [email protected] or by referring to www.yieldstreetprismfund.com. The prospectus should be read carefully before investing in the Fund. Investments in the Fund are not bank deposits (and thus not insured by the FDIC or by any other federal governmental agency) and are not guaranteed by Yieldstreet or any other party.

300 Park Avenue 15th Floor, New York, NY 10022

844-943-5378

No communication by YieldStreet Inc. or any of its affiliates (collectively, “Yieldstreet™”), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice. Nothing on this website is intended as an offer to extend credit, an offer to purchase or sell securities or a solicitation of any securities transaction.

Any financial projections or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. Estimated projections do not represent or guarantee the actual results of any transaction, and no representation is made that any transaction will, or is likely to, achieve results or profits similar to those shown. In addition, other financial metrics and calculations shown on the website (including amounts of principal and interest repaid) have not been independently verified or audited and may differ from the actual financial metrics and calculations for any investment, which are contained in the investors’ portfolios. Any investment information contained herein has been secured from sources that Yieldstreet believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefor.

Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by Yieldstreet or any other party, and MAY lose value. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. Investors must be able to afford the loss of their entire investment.

Investments in private placements are speculative and involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest. Additionally, investors may receive illiquid and/or restricted securities that may be subject to holding period requirements and/or liquidity concerns. Investments in private placements are highly illiquid and those investors who cannot hold an investment for the long term (at least 5-7 years) should not invest.

Alternative investments should only be part of your overall investment portfolio. Further, the alternative investment portion of your portfolio should include a balanced portfolio of different alternative investments.

Articles or information from third-party media outside of this domain may discuss Yieldstreet or relate to information contained herein, but Yieldstreet does not approve and is not responsible for such content. Hyperlinks to third-party sites, or reproduction of third-party articles, do not constitute an approval or endorsement by Yieldstreet of the linked or reproduced content.

Investing in securities (the "Securities") listed on Yieldstreet™ pose risks, including but not limited to credit risk, interest rate risk, and the risk of losing some or all of the money you invest. Before investing you should: (1) conduct your own investigation and analysis; (2) carefully consider the investment and all related charges, expenses, uncertainties and risks, including all uncertainties and risks described in offering materials; and (3) consult with your own investment, tax, financial and legal advisors. Such Securities are only suitable for accredited investors who understand and willing and able to accept the high risks associated with private investments.

Investing in private placements requires long-term commitments, the ability to afford to lose the entire investment, and low liquidity needs. This website provides preliminary and general information about the Securities and is intended for initial reference purposes only. It does not summarize or compile all the applicable information. This website does not constitute an offer to sell or buy any securities. No offer or sale of any Securities will occur without the delivery of confidential offering materials and related documents. This information contained herein is qualified by and subject to more detailed information in the applicable offering materials. Yieldstreet™ is not registered as a broker-dealer. Yieldstreet™ does not make any representation or warranty to any prospective investor regarding the legality of an investment in any Yieldstreet Securities.

Banking services are provided by Evolve Bank & Trust, Member FDIC.

Investment advisory services are provided by YieldStreet Management, LLC, an investment advisor registered with the Securities and Exchange Commission.

Our site uses a third party service to match browser cookies to your mailing address. We then use another company to send special offers through the mail on our behalf. Our company never receives or stores any of this information and our third parties do not provide or sell this information to any other company or service.

Read full disclosure
Copyright © 2021 YieldStreet, Inc.