Federal funds rate clause: Copy, customize, and use instantly
Introduction
A federal funds rate clause ties the interest rate to the federal funds rate set by the Federal Reserve. This ensures that the interest rate on outstanding payments reflects changes in the broader economy. It helps maintain fairness and flexibility, adjusting automatically in response to fluctuations in market interest rates.
Below are templates for federal funds rate clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.
Standard federal funds rate clause
This version links the interest rate to the federal funds rate.
The interest rate applicable to any overdue amounts under this Agreement shall be calculated based on the federal funds rate, plus [X]%, with the federal funds rate being the most recent rate published by the Federal Reserve. The rate will be adjusted monthly based on changes to the federal funds rate.
Federal funds rate clause with provision for a minimum rate
This version includes a minimum interest rate.
The interest rate on overdue payments will be determined by the federal funds rate plus [X]%. However, the interest rate shall never be less than [Y]%, regardless of any reduction in the federal funds rate.
Federal funds rate clause with provision for a maximum rate
This version sets a maximum interest rate.
The interest rate for overdue amounts will be calculated as the federal funds rate plus [X]%, but in no event shall the interest rate exceed [Y]% per annum, even if the federal funds rate increases above this limit.
Federal funds rate clause with provision for rate adjustments based on federal funds rate changes
This version adjusts the rate according to federal funds rate changes.
The interest rate on any unpaid amounts will be recalculated at the start of each calendar quarter, based on the federal funds rate plus [X]%, and adjusted to reflect any changes in the federal funds rate during that period.
Federal funds rate clause with provision for rate fluctuation
This version allows for rate fluctuation based on federal funds rate changes.
The interest rate applicable to any overdue amounts will be the federal funds rate plus [X]%, subject to fluctuation based on the federal funds rate. Any change in the federal funds rate will result in an immediate adjustment to the interest rate on outstanding balances.
Federal funds rate clause with provision for quarterly rate recalculation
This version includes quarterly rate recalculation.
The interest rate on any overdue payments will be recalculated quarterly, based on the federal funds rate published on the last business day of each quarter, plus [X]%. This recalculated rate will apply for the following quarter.
Federal funds rate clause with provision for fixed margin
This version applies a fixed margin over the federal funds rate.
The interest rate on overdue amounts shall be calculated as the federal funds rate plus a fixed margin of [X]%. The federal funds rate will be determined by the most recent rate published by the Federal Reserve.
Federal funds rate clause with provision for minimum adjustment period
This version includes a minimum adjustment period.
The interest rate on overdue balances will be based on the federal funds rate plus [X]%. Adjustments to the rate will be made no more frequently than every [X] days, even if the federal funds rate changes during that period.
Federal funds rate clause with provision for a cap and floor
This version sets both a cap and a floor for the interest rate.
The interest rate on any overdue amounts will be the federal funds rate plus [X]%. However, the rate shall not exceed [Y]% per annum or fall below [Z]% per annum, regardless of fluctuations in the federal funds rate.
Federal funds rate clause with provision for daily compounding
This version includes daily compounding of interest.
The interest rate for overdue amounts will be the federal funds rate plus [X]%, compounded daily. Interest will be calculated on the principal and previously accrued interest and applied daily until the outstanding balance is paid in full.
Federal funds rate clause with provision for notice of rate change
This version requires notice of rate changes.
Any adjustment to the interest rate due to changes in the federal funds rate will be communicated to [Party B] in writing within [X] days of the change. The new rate will apply to all outstanding amounts from the date of notification.
Federal funds rate clause with provision for retroactive rate adjustment
This version includes retroactive rate adjustments.
The interest rate for overdue amounts will be the federal funds rate plus [X]%. If the federal funds rate changes, the new rate will apply retroactively to any unpaid balances from the date the federal funds rate change occurred.
Federal funds rate clause with provision for interest rate freeze
This version freezes the interest rate for a specified period.
Despite any fluctuations in the federal funds rate, the interest rate for overdue amounts will remain fixed at [X]% for a period of [X] months following the due date. After this period, the rate will adjust according to changes in the federal funds rate.
Federal funds rate clause with provision for rate reset after a specified period
This version resets the rate after a specified period.
The interest rate on overdue payments will initially be the federal funds rate plus [X]%. After [X] months, the interest rate will reset to the new federal funds rate plus [X]%, subject to any changes in the rate during that period.
Federal funds rate clause with provision for dual rate
This version applies a dual rate based on time elapsed.
The interest rate for overdue amounts will be the federal funds rate plus [X]% for the first [X] days. After that period, the rate will increase to [Y]% per annum, reflecting the changes in the federal funds rate and the time elapsed.
Federal funds rate clause with provision for tiered interest rates
This version applies tiered interest rates based on payment duration.
The interest rate for overdue amounts will be the federal funds rate plus [X]% for balances overdue up to [X] days. If payment remains overdue for more than [X] days, the rate will increase to [Y]% per annum, based on the federal funds rate plus a higher margin.
Federal funds rate clause with provision for immediate adjustment to changes in federal funds rate
This version applies immediate rate adjustments.
The interest rate on overdue amounts will immediately adjust to reflect any changes in the federal funds rate. The rate will be calculated as the federal funds rate plus [X]% and will be applied to all outstanding amounts from the date the federal funds rate changes.
Federal funds rate clause with provision for interest adjustment based on economic conditions
This version ties the rate to economic conditions.
The interest rate on overdue amounts will be based on the federal funds rate plus [X]%. However, if economic conditions, as determined by [Party A], suggest that the federal funds rate is no longer reflective of the market conditions, the rate may be adjusted accordingly.
Federal funds rate clause with provision for automatic rate increase after delay
This version increases the rate automatically after a delay.
If any payment remains overdue for more than [X] days, the interest rate will automatically increase to [Y]% per annum, based on the federal funds rate plus an additional margin. This increase will apply immediately to any overdue balance.
Federal funds rate clause with provision for adjustment based on benchmark rate
This version includes adjustment based on a benchmark rate.
The interest rate for overdue payments will be based on the federal funds rate plus [X]%, adjusted annually according to [specific benchmark rate] to reflect changes in the broader financial market.
Federal funds rate clause with provision for cap on overall interest charges
This version caps overall interest charges.
The interest rate applied to overdue amounts will be the federal funds rate plus [X]%. However, the total interest charged on any overdue balance will not exceed [Y]% of the outstanding balance, regardless of the duration of the overdue period.
Federal funds rate clause with provision for adjustment based on rate of inflation
This version includes adjustment for inflation.
The interest rate for overdue payments will be based on the federal funds rate plus [X]%. The rate will be adjusted annually to reflect the rate of inflation as measured by [inflation index], with the new rate becoming effective on the anniversary of the Agreement.
Federal funds rate clause with provision for monthly rate adjustment
This version allows for monthly rate adjustments.
The interest rate on overdue amounts will be based on the federal funds rate plus [X]%. The rate will be adjusted monthly to reflect any changes in the federal funds rate published by the Federal Reserve, ensuring that the rate remains aligned with market conditions.
Federal funds rate clause with provision for maximum rate based on federal funds rate
This version includes a cap based on the federal funds rate.
The interest rate for overdue payments will be calculated as the federal funds rate plus [X]%. However, the interest rate shall not exceed [Y]% per annum, even if the federal funds rate increases beyond this threshold.
Federal funds rate clause with provision for minimum interest rate
This version includes a minimum interest rate.
Despite any fluctuations in the federal funds rate, the interest rate on any overdue amounts will not fall below [X]% per annum. This ensures that the rate remains at a reasonable level, even during periods of low interest rates.
Federal funds rate clause with provision for interest rate adjustments every 6 months
This version adjusts the rate semi-annually.
The interest rate on overdue balances will be the federal funds rate plus [X]%. The rate will be reviewed and adjusted every 6 months to reflect changes in the federal funds rate.
Federal funds rate clause with provision for interest rate increase after 30 days of overdue payment
This version triggers a rate increase after a set period.
If a payment is overdue for more than 30 days, the interest rate on the outstanding balance will increase to [X]% per annum, based on the federal funds rate plus an additional margin. This rate will apply until the balance is paid in full.
Federal funds rate clause with provision for rate changes due to extraordinary economic conditions
This version includes provisions for extraordinary economic conditions.
If extraordinary economic conditions cause significant fluctuations in the federal funds rate, the interest rate on overdue payments may be adjusted to reflect these changes. Any adjustment will be mutually agreed upon by the Parties.
Federal funds rate clause with provision for interest only on overdue principal
This version applies interest only on the overdue principal.
The interest rate on overdue payments will be based on the federal funds rate plus [X]%. Interest will only be charged on the principal balance, and any accrued interest will not compound.
Federal funds rate clause with provision for immediate interest rate changes after rate hikes
This version applies immediate changes to the interest rate.
The interest rate on overdue amounts will immediately adjust to reflect any increase in the federal funds rate. The new rate will apply from the date the federal funds rate change is publicly announced.
Federal funds rate clause with provision for interest calculation on an annual basis
This version calculates interest annually.
Interest on overdue payments will be calculated annually, based on the federal funds rate plus [X]%. The rate will be recalculated at the start of each calendar year, and any changes will be reflected in the interest calculations for the following year.
Federal funds rate clause with provision for interest on overdue amounts with grace period
This version includes a grace period before interest applies.
No interest will be charged on overdue amounts within the first [X] days after the due date. After the grace period, interest will accrue on the outstanding balance at a rate equal to the federal funds rate plus [X]% per annum.
Federal funds rate clause with provision for rate adjustments based on quarterly reviews
This version adjusts the rate quarterly.
The interest rate for overdue payments will be the federal funds rate plus [X]%. The rate will be reviewed and adjusted quarterly based on any changes in the federal funds rate, with the new rate applying to all outstanding amounts.
Federal funds rate clause with provision for different rates for different overdue periods
This version applies different rates based on the overdue period.
Interest on overdue amounts will be charged based on the federal funds rate plus [X]%. For amounts overdue up to [X] days, the rate will be [Y]%. For amounts overdue longer than [X] days, the rate will increase to [Z]% per annum.
Federal funds rate clause with provision for adjustment based on federal reserve actions
This version allows for adjustments based on Federal Reserve actions.
The interest rate on overdue payments will be based on the federal funds rate plus [X]%. If the Federal Reserve takes action that significantly affects the federal funds rate, both Parties agree to adjust the interest rate accordingly.
Federal funds rate clause with provision for a non-compounding rate
This version applies a non-compounding rate.
The interest rate on overdue amounts will be calculated at the federal funds rate plus [X]%, with interest applied on a non-compounding basis. Interest will be calculated on the outstanding principal balance and will not compound.
Federal funds rate clause with provision for rate recalculation if payments are delayed more than once
This version recalculates the rate after multiple delays.
If any payment is overdue more than once during the term of this Agreement, the interest rate on all future overdue payments will increase to the federal funds rate plus [X]%, regardless of subsequent changes in the federal funds rate.
Federal funds rate clause with provision for an interest-free period
This version includes an interest-free period.
[Party A] agrees to allow [Party B] a grace period of [X] days after the due date before interest is applied. During this period, no interest will accrue. After the grace period, interest will be charged at the federal funds rate plus [X]% per annum.
Federal funds rate clause with provision for immediate application of new rates
This version applies new rates immediately.
Any change in the federal funds rate will result in an immediate adjustment to the interest rate on overdue payments. The new rate will be effective from the date the federal funds rate change is announced by the Federal Reserve.
Federal funds rate clause with provision for independent verification of federal funds rate
This version allows for independent verification.
The federal funds rate used to calculate the interest rate on overdue amounts will be verified by an independent third party, such as [specified financial institution], to ensure that the correct rate is applied based on the most recent data.
Federal funds rate clause with provision for payment reduction based on rate decrease
This version reduces the payment amount if rates decrease.
If the federal funds rate decreases during the term of this Agreement, [Party A] agrees to reduce the interest rate on overdue amounts in proportion to the reduction in the federal funds rate.
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