You won't need to With this cooperative benefit.
By Tara Vermillion, Vice President, Harrisonville Office
Economists predict that the Federal Reserve will reduce interest rates this year. How does this benefit you and your current loans? Many lending institutions will offer to refinance your loans at a lower interest rate, however at FCS Financial we offer our member-owners a conversion opportunity. The conversion opportunity saves you time, money on interest and fee charges because you don’t have to conduct a complete refinance.
What is a conversion?
A conversion is your opportunity to reduce the billed interest rate on your loan by converting your current interest rate to a lower interest rate. Conversions can also be used to change interest-rate products. An example is switching from an adjustable interest rate to a fixed interest rate or switching from a 20-year to a 15-year term. Conversions can lead to cost savings and lower risk.
How does a conversion benefit you, the member-owner?
In 2023, many producers closed loans at higher interest rates than we have had in the last several years. If interest rates come down, you can save money by asking your loan officer to look at interest rate conversion opportunities on all your loans. Not every loan may be eligible or ideal for a conversion.
Your loan officer will assess each of your loans to ensure that the cost associated with the conversion will provide you with savings that you will see in both the short term and total life of your loan by lowering the amount of total interest you owe.
How is a conversion different from refinancing my loan?
Ease, simplicity and cost savings are three of the big differences. A conversion takes one signature from you as the member-owner. There is no new title work or appraisal required so the fee is minimal compared to the cost savings of lowering your interest rate. A refinance requires all the paperwork, fees, title work and appraisals of a new loan.
Is there a fee to do a conversion?
Yes, there is a fee charged for each conversion. The fee varies depending on the type and size of loan. The fee associated with a conversion is far less than the cost of a full refinance.
Are all my loans eligible for a conversion?
No. Not all loans will be eligible for an interest rate conversion. Your FCS Financial loan officer will help you evaluate if each individual loan can be lowered enough to make it beneficial to you.
Our goal is to make sure a conversion provides a benefit for you so if it doesn’t make sense, we’ll tell you that.
When should you ask your loan officer about a conversion?
Most loans are eligible for conversion one year from the date of closing. Once a conversion is completed, the loan will again be eligible one year from the date of conversion. You can convert eligible loans multiple times if it makes sense financially.
How can FCS Financial do a conversion?
As a Farm Credit cooperative, FCS Financial has a unique funding structure. Our loans are funded by the sale of bonds on the open market and the ability to swap bonds allows us to offer our member-owners the benefit of conversions when it makes sense for them.
To learn more about interest rate conversions and if it makes sense for you, contact your local loan officer.
Tara Vermillion is a Vice President in the FCS Financial Harrisonville office. With more than 13 years at FCS Financial, she enjoys helping Missouri farmers achieve their goals. If you’re looking for an ag lender who understands the ups and downs of Missouri agriculture, reach out to an FCS Financial loan officer today.
