BRUSSELS, March 21 (Reuters) - The euro zone's permanent bailout fund, the European Stability Mechanism, will be backed by paid-in and callable capital and offer loans more cheaply than the temporary facility does now, a euro zone source said.
The ESM, which will have an effective lending capacity of 500 billion euros, will be backed by 80 billion euros of paid-in capital and 620 billion euros of callable capital, without any guarantees, the source said.
It will offer loans at funding costs plus 200 basis points for loans up to three years and plus another 100 basis points for loans longer than three years.
There will be no service charge.
The current bailout fund, the European Financial Stability Facility (EFSF), offers loans with a margin of 300 basis points for up to three years and 400 basis points over three years plus a one-off fee of 50 basis points.
The decisions on the capital structure of the ESM and the pricing of its loans were taken at a meeting of European Union finance ministers on Monday, the source said.
Reporting by Jan Strupczewski, editing by Rex Merrifield