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Code of Federal Regulations Title 7. Agriculture § 7.5001.401 Interest rate provisions

Current as of January 02, 2025 | Updated by Findlaw Staff

Interest rates, interest rate caps, and incremental interest rate adjustment limitations on a guaranteed loan are negotiated between the Lender and the borrower. The interest rate for a guaranteed loan can be either fixed or variable, or a combination thereof, as long as it is a legal rate. Interest rates cannot be more than those rates the lender customarily charges its borrowers for non-guaranteed loans in similar circumstances in the ordinary course of business. The Agency encourages each lender to use the secondary market and pass interest-rate savings on to the borrower.

(a) Different rates on guaranteed and unguaranteed portion of the guaranteed loan. It is permissible to have different interest rates on the guaranteed and unguaranteed portions of the loan.

(b) Variable interest rates. A variable interest rate must be an interest rate that is tied to a published base rate, as published in a national or regional financial publication, and is agreed to by the Agency.

(1) The variable interest base rate must be specified in the promissory note along with any interest factors (e.g., National Prime plus 1.0 percent).

(2) The lender may adjust the variable interest rate at different intervals during the term of the loan, but not more often than quarterly.

(3) The lender must incorporate, within the variable rate promissory note, a provision for adjustment of payment installments to fully amortize the loan by its maturity date.

(c) Multi-rates. When multi-rates are used, the lender must provide the Agency with the overall effective Interest rate for the entire loan.

(d) Interest rate changes. Any change in the base rate or fixed interest rate between issuance of the conditional commitment and the issuance of the loan note guarantee must be approved by the Agency. Approval of such a change must be shown as an amendment to the conditional commitment and must be reflected on the guaranteed loan closing report form.

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Cite this article: FindLaw.com - Code of Federal Regulations Title 7. Agriculture § 7.5001.401 Interest rate provisions - last updated January 02, 2025 | https://codes.findlaw.com/cfr/title-7-agriculture/cfr-sect-7-5001-401/

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