Lesson 3 of 7
The cost of funds and the margin over it
Every loan is made with money that has a cost: deposits, borrowing or the lender's own capital. This lesson defines the cost of funds and the two ratios used to measure it, explains why the source of funding matters, shows how the margin over the cost of funds is measured and how it moves when rates change, and sets out the adjustments analysts make for subsidised money and inflation.
Published 15 October 2026 · Listen to this lesson
In this lesson
- What the cost of funds is
- Two ratios, and how they connect
- Where the money comes from
- The margin over the cost of funds
- Subsidised money and inflation
- Questions to ask about funding