IRVING, Tex. - Associates First Capital Corp. is offering a home equity loan whose rate goes down as much as 325 basis points if borrowers make on-time payments.

The Freedom Loan reduces borrowers' rates every year for four years. Borrowers must make 12 punctual payments to qualify for each annual rate drop.

An earlier version of the product, which Associates began offering last July, offered a reduction of up to 225 basis points. About 140,000 customers took out such loans, and 80% of them are on track to reduce their rates. The success of the earlier Freedom Loan prompted Associates to develop the "new and improved" version, officials said.

The product has increased customer retention and will improve the credit quality of the company's portfolio over time, said Barry W. Hess, senior vice president for home equity marketing.

Mr. Hess said borrowers who signed up for the last year's Freedom Loan would have to refinance to qualify for the new reduction plan, but their payment record would follow them to the new loan.

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