Fixed interest rate – (optional clause)

Fixed interest rate – (optional clause)

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This document is a fixed interest rate clause.

This precedent is a fixed interest rate clause found in loan agreements. Depending on the complexity of the loan transaction the clause might be customised to include a much more complex process about negotiating the interest rate to be applied to a loan after the expiration of a fixed interest rate period.

Interest rates

When dealing with loan agreements between individuals (whether corporate or human), it is often the case that the interest rate is fixed for the sake of simplicity. However, when dealing with financial institutions, a variable interest rate is more common as it gives the lender more flexibility to be more competitive in the market or to adapt quickly to an adverse change to its cost of funds.

Certain lenders offer fixed interest rate loans from time to time. In this instance the interest rate is fixed for a specific period. Unless the loan is for a short period, a lender will seldom agree to a fixed interest rate for the entire term of the loan. Fixed interest rates can apply to loans where the loan amount is paid in one lump sum or where the borrower draws down on the available loan amount over time.

Related precedents

  • Bilateral facility agreement – secured with guarantee
  • Bilateral facility agreement – unsecured

This document has been authored for Lexis Nexis by Elise Margow, Principal, Legally Speaking.

This document is prepared with the assistance of Specialist Editors Geoff Geha, Partner, Clayton Utz and Karen Lee, Principal and Consultant, Legal Know-How.