A type of credit enhancement that represents the difference between the interest rate received on the underlying collateral (in a debt security)- in a securitized structure- and the coupon on the security issued. Excess spread is perceived as the primary line of defense against credit losses and a mechanism to avoid early amortization. As such, excess spread is part of securitization, providing the primary internal credit enhancement facility.

Excess spread is the remaining finance charges (that the seller would receive) after all relevant expenses are covered (coupon paid, servicing costs, expected losses, etc.)

The amount of excess spread depends on multiple factors, including finance charges collected on credit balances, the amount of interchange income collected, delinquency and net charge-off rates, etc.