An interest rate swap uncouples the source-of-finance decision from the basis of the interest payments.

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An interest rate swap allows two parties to exchange different types (fixed or floating) of interest payments without exchanging the underlying principal amount. This means that the parties can effectively decouple the source-of-finance decision (where they borrow money from) from the basis of the interest payments (fixed or floating rate). By doing so, they can each choose a financing option that best suits their needs and then simply exchange the type of interest payment they want to make or receive.

An Interest Rate Swap Uncouples the Source-Of-Finance Decision from the Basis