London Inter-Bank Offer Rate. The interest rate that the banks charge each other for loans (usually in Eurodollars). This rate is applicable to the short-term international interbank market, and applies to very large loans borrowed for anywhere from one day to five years. This market allows banks with liquidity requirements to borrow quickly from other banks with surpluses, enabling banks to avoid holding excessively large amounts of their asset base as liquid assets. The LIBOR is officially fixed once a day by a small group of large London banks, but the rate changes throughout the day.

Use LIBOR in a sentence

You should try and know how much the libor will be before you ever decide to take out the loan.

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Me and my friend learned that the libor was something banks did with each other that involved loans and charging each other.

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The company's respected status within the consumer goods industry allowed it to finance its debts at rates barely above LIBOR.

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