---
title: "Spread / Margin | Altss Glossary"
description: "Spread (margin) is the incremental interest rate charged above a reference rate (e.g., SOFR) to compensate for credit risk and structure."
canonical: "https://altss.com/glossary/spread-margin"
---

Private Credit

# Spread / Margin

Publisher: Altss LLCPublished 2026-01-12Content modified 2026-01-12

Spread (margin) is the incremental interest rate charged above a reference rate (e.g., SOFR) to compensate for credit risk and structure.

**Allocator relevance:** High — primary driver of income return and a key marker of underwriting discipline across cycles.

**Expanded Definition**
Spread reflects borrower risk, collateral quality, leverage, seniority, covenant strength, and market competition. Total loan economics often combine spread with fees, OID, call protection, and expected loss. Allocators compare spreads across strategies (senior secured vs unitranche vs opportunistic credit) and monitor “spread compression” as a sign of deteriorating lender power or late-cycle behavior.

**Decision Authority & Governance**
Governance includes investment committee pricing discipline, policy on repricings/amend-and-extends, covenant negotiation standards, and reporting that separates contractual yield from realized yield after losses and prepayments.

**Common Misconceptions**

- Higher spread always means a better deal.

- Spread equals total return (fees/OID/losses matter).

- Spread levels are stable over time.

**Key Takeaways**

- Spread must be evaluated with structure and covenants.

- Total yield includes fees, OID, and realized losses.

- Compression is a cycle risk indicator.

## Related terms

[SOFR (Secured Overnight Financing Rate)](https://altss.com/glossary/sofr-secured-overnight-financing-rate)[Senior Secured Debt](https://altss.com/glossary/senior-secured-debt)[Underwriting Standards](https://altss.com/glossary/underwriting-standards)

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