Thanks to a program, which allows farmers and rural residents to convert their existing loans to lower interest rates, almost 15,000 Farm Credit Services of Mid-America customers have saved significant interest dollars in 2011. That’s the number of customers who took advantage of FCS’s Conversion Program, converting $2.72 billion in loans to lower interest rates, and slicing an average of .50 percent off their interest costs. Estimated customer savings is $13.6 million annually.
“More than 50% of our conversion activity has occurred in August,” said Bill Johnson, president and chief executive officer stating that interest rates have once again dropped to near all-time lows. “This month alone, staff has converted almost 7,500 customer loans.”
That represents $1.37 billion in loan volume saving customers an estimated $6.8 million annually. The Loan Conversion Option gives customers the ability to quickly and easily change the interest rates on their Farm Credit loans during the term of those loans. The option consists of an amendment to the loan agreement which authorizes Farm Credit to change the loan term or type of loan product being used for a very small processing fee.
Conversion does not require refinancing, with its associated costs and services, such as new financials, appraisals, and title searches. There is also no need to re-qualify for the loan. The value-added conversion option gives Farm Credit customers the advantages of the ability to lock in rates for longer or shorter periods of time, too.
To assist customers in taking advantage of fixed-rate long-term financing while rates are near record lows, Farm Credit staff are performing an intensive customer analysis, identifying and contacting those who would benefit by using their Loan Conversion Option.
“Conversions not only offer the probability of significant savings, but they can provide added security in knowing that a customer can fix an interest rate for the life of the loan,” said Johnson. “It is impossible to predict how low rates could go or at what point they’ll move up, but taking advantage of converting to a fixed rate product goes a long way in insuring against future uncertainty,” he said.
In a related move, earlier this year Farm Credit rolled back interest rates resulting in an additional $43 million annual interest expense savings to customers.
“On February 1, 2011 customers saw interest rates on current loans lowered by .35 percent,” Johnson said. “This move and the fact that we offer programs like conversions are two more ways Farm Credit continues to offer value to the marketplace, reflecting our commitment to agriculture and our customer-members.”