Amortization and Interest Rate
The maximum guarantee period is the lesser of 25 years or the remaining economic life of the vessel or Technology, as determined by the Maritime Administration. The actual financing period will be based on the financial, economic, market and other critical aspects of the project. Amortization in equal payments of principal is usually required. However, other amortization methods such as level debt (equal payments of principal and interest) may be approved if sufficient security in the form of long-term charters, reduction in the amount of guarantee and/or the reduction in the length of the guarantee period is offered.
The interest rate of the guaranteed obligation is determined by the private sector and must be determined fair and reasonable by the Maritime Administration. In establishing the interest rate, the obligee can generally use the rate on a U.S. Treasury security of comparable average life to that of the proposed debt issuance. In most cases the interest rate is fixed, however, MARAD has also approved floating interest rates with restrictions.