what is floating interest rate

A floating interest rate, also known as a variable or adjustable rate, is an interest rate that changes periodically based on economic or financial conditions. It is commonly used for various types of debt instruments such as loans, bonds, mortgages, and credit. Floating interest rates typically change based on a reference rate, such as the prime rate or the London Interbank Offered Rate (LIBOR), and may have other special features such as interest rate caps or limits on the maximum interest rate or maximum change in the interest rate that is allowable