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LOANS FAQ

• What interest rate does Southwest Corporate charge on its line of credit and term loan offerings?
  Current interest rates on lines of credit and term loans are available under the Loan Rates link above. Interest rates for term loans posted on this website each day are "indicator rates." Member credit unions should contact Southwest Corporate's Loan Department at 800.442.5763, option 6, to inquire about the most current rate on a term loan of a specific maturity.

• Does Southwest Corporate require its members to establish a line of credit?
  If a member has settlement transactions through Southwest Corporate, the establishment of a line of credit is required. Two lines of credit are offered that are "settlement-related." They are: Performance Settlement Line of Credit and Standard Settlement Line of Credit. A member may utilize one or more of these credit lines as back-up liquidity for settlement transactions. Automated loan advances incur no penalties when used to cover overnight settlement transactions.

• What factors are considered in determining the amount of the line of credit?
  In determining the amount of your credit union's line of credit, items that are considered are: your credit union's overall creditworthiness, the amount of settlements processed through Southwest Corporate, the amount of collateral to be pledged, your credit union's current and anticipated loan demand, and the amount of collateral pledged to other financial institutions, among others.

• Is there a fee for establishing a line of credit or a term loan?
  If a credit union has established a Membership Capital Account (MCA) with Southwest Corporate, there are no fees for establishing or maintaining a line of credit. If a credit union has not established an MCA with Southwest Corporate, a $200.00 application fee is charged to establish or increase each line of credit and term loan and a $100.00 renewal fee is charged annually to maintain each line of credit. Interest rates on line of credit advances are also higher.

• How does a credit union apply for a line of credit or a term loan?
  An officer of the credit union should contact Southwest Corporate's Loan Department to request that a line of credit/loan application be sent to the credit union or download the application from Southwest Corporate's website. Once the Loan Department receives the completed and executed application and any other financial documents and information required, the request is processed, often within one day of receiving the completed application.

• What types of lines of credit does Southwest Corporate offer?
  Southwest Corporate offers three types of lines of credit as described below:
  1. Standard Settlement Line of Credit - This line of credit is secured by a general pledge of all assets of the credit union and may serve as a back-up line of credit for settlement transactions. If additional funds are needed to cover settlement transactions, a loan advance from this line of credit is automatically credited to the member's main transaction account to cover the settlement activity, up to a maximum of the line of credit amount.
  2. Performance Settlement Line of Credit - This line of credit is secured by specific collateral. Collateral generally acceptable to Southwest Corporate is:
     1. share certificates or shares on deposit with Southwest Corporate;
     2. acceptable investment securities held in safekeeping by Southwest Corporate; or
     3. the borrowing credit union's member auto loan portfolio or government guaranteed student loan portfolio.
        For lines of credit or term loans secured by share certificates or shares on deposit with Southwest Corporate, the collateral to loan ratio requirement is 1.00:1.00. For lines of credit and term loans secured by investment securities held in safekeeping at Southwest Corporate, the minimum collateral to loan ratio is 1.02:1.00, though this collateral ratio requirement can be higher depending upon the investment securities to be pledged and the creditworthiness of the member. For lines of credit and term loans secured by member auto loan portfolios or other loan porfolios, the collateral to loan ratio requirement is determined at the time of the loan application and is based upon a review of the portfolio to be pledged and the creditworthiness of the member.
  3. Advantage (Non-Settlement) Line of Credit - This line of credit is secured by a pledge of specific collateral as described in #2 above.
  
  Note: This line of credit is Southwest Corporate's most cost-effective credit line and is available to member credit unions that have an MCA account with Southwest Corporate and subscribe to the TranZact system. Loan advances from this credit line are self-managed and obtained via TranZact until 4:00 p.m. central time on Southwest Corporate business days. These funds do not automatically advance to cover settlement activity. Loan advances from this Advantage Line of Credit are allowed up to the maximum amount of the line of credit.

• How is an advance against a line of credit obtained?
  An advance against a Standard Settlement or Performance Settlement Line of Credit is obtained by contacting a Southwest Corporate Member Service Representative at 800.442.5763, option 1. Or, if your credit union subscribes to TranZact, an authorized employee of your credit union can process a loan advance using this online system. Loan proceeds are deposited into your credit union's Cash Management or Daily Shares account. You may also allow your credit union's transaction account to become negative due to automated settlement transactions or wire transfers and an amount sufficient to bring the balance in the account to zero will automatically advance from your credit union's line(s) of credit.

  An advance against an Advantage Line of Credit is obtained by a member credit union using the TranZact system. Advances from this credit line are not tied to a member's settlement activity.

• When must a loan advance be repaid?
  A loan advance on any of the three types of lines of credit must be repaid within the earlier of 12 calendar months after the date on which a loan advance is made, or on the termination date of the Open-End Loan Promissory Note, if applicable.

• How is a loan advance paid?
  Repayment of a loan advance may be handled by either contacting a Southwest Corporate Member Service Representative or by processing the payment using the TranZact system. A credit union may also mail a check to Southwest Corporate to repay a loan advance.

• How is interest repaid?
  Accrued interest is due and payable on the seventeenth of each calendar month. The member has the option of either voluntarily paying the interest due by the seventeenth of each month or allowing interest to be collected automatically by Southwest Corporate from its main transaction account. The amount collected represents accrued interest due through the last day of the prior calendar month. Repayment by a member of accrued interest is handled in the same way as a loan advance repayment.

• What types of Term Loans does Southwest Corporate offer?
  Southwest Corporate can customize the structure of a Term Loan to meet a member's needs. For example, Term Loans may be variable or fixed-rate, bullet or amortizing, and may carry specific options such as call dates. Term Loans may carry maturity terms that range from one day to a maximum term of twelve years. A specific or general pledge of collateral is required. Acceptable specific collateral is:
  1. share certificates or shares on deposit with Southwest Corporate;
  2. certain investment securities held in safekeeping by Southwest Corporate; or
  3. the borrowing credit union's member auto loan or government guaranteed student loan portfolio(s).

• Can a credit union establish a line of credit or term loan with Southwest Corporate if it has a loan or line of credit at another financial institution?
  Yes; different collateral may need to be pledged to each financial institution so that there is no overlap, and in some cases, a subordination agreement must be obtained.

Contact Southwest Corporate's Loan Department at lending@swcorp.org or 800.442.5763, option 6 for more information.