Loan Structure
The loan structure is the basis of your loan, meaning the ‘rules’ governing it. Every loan has a lifespan or a term such as a 10 year loan for the purchase of livestock. Over and above the term is what is called a fixed interest rate agreement. The fixed interest rate agreement is what allows you to fix a specific time period at an agreed interest rate. An example would be 6.5% for 3 years.

Loan Breakdown
During the Global Financial Crisis, the banking fraternity unpacked all the elements of loans and explained to clients how they worked. The key elements are:
● Margin;
● Global liquidity cost; and
● Banking base rate.
We won’t delve into the complexities of each of these elements, but instead focus on what we can infer from the information provided by the banks.
There is now a degree of transparency and clarity around the cost of your interest rate. As the margin had been agreed upon, you are now able to work more closely with your banker to develop an interest rate strategy which meets your needs.
Ideally, when you enter into an agreement, you are agreeing to an interest rate margin with your banker that is applied across both the short and long term rates.