Haircut

Last Updated: Jun 7, 2019

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In lending, a Haircut generally means the difference between the value of a loan and the value of the collateral securing the loan. More generally it is a term used for a variety of spreads and margins. The term is commonly used during refinancing when one Lender is paying off another. As an example, if a Lender has loans outstanding to a troubled Borrower for $1MM collateralized by assets only valued at $900M, that Lender may decide to take a $100M Haircut to exit the loan.