The result of an interest-rate swap is usually a lower interest rate for both swap partners and a better balance between cash inflows and outflows for both parties to the swap.

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An interest rate swap is a financial contract in which two parties agree to exchange interest payments on a notional principal amount. The purpose of an interest rate swap is to alter the interest rate exposure of the parties involved. In a typical interest rate swap, one party agrees to pay a fixed interest rate to the other party, while the other party agrees to pay a floating interest rate. The floating interest rate is typically based on a market benchmark, such as the London Interbank Offered Rate (LIBOR). The result of an interest rate swap is usually a lower interest rate for both swap partners and a better balance between cash inflows and outflows for both parties to the swap.

The Result of an Interest-Rate Swap Is Usually a Lower