LIBOR stands for London Inter-Bank Offered Rate. It is the interest rate on short-term loans that major banks charge each other. The LIBOR is the base interest rate that gives the best indication of global interest rates in the world’s major developed economies. Many lenders offer variable interest loans by fixing the rate charged at a set percentage – usually – above the LIBOR. So you will see variable loans quoted as LIBOR+ 3.5 percent for example.