Tractor loans are taken by businessmen or farmers to purchase either a new or a pre-owned tractor. Most of them avail this type of loans as an investment for their commercial or agricultural purposes. However, a tractor loan is very different from the other types of loans in the market. What is a tractor loan? Who can avail one? Here’s a brief guide explaining the same:
What Are the Features of Tractor Loans?
Tractor loans don’t have very complex documentations and it is easy to get faster approvals. They usually have attractive rates of interest and anyone (subject to certain criteria) can apply for one. The borrower can get as much as a 90 percent of the finance through a tractor loan. The creditors also allow for a flexible payback option marked to the crop cycle. The repayment tenure has an upper limit of 84 months. Some creditors even have offers specific to certain types of tractors.
Who Is Eligible for Tractor Loan?
- Farmers/businessmen with their own land
- Farmers/businessmen with agricultural and commercial land
- Farmers/businessmen with high equity
What Are the Documentation Required for this Kind of Loans?
The documentation is more or less the same for everyone.
- You need to produce an ID proof, address proof, documents supporting the ownership of land and records of any past loans. If there is any co-borrower, their documentation is required too. You would need a guarantor for this type of loan, who will need to sign and submit his/her photographs. A guarantor is someone, who agrees to pay on the borrower’s behalf if they are unable to pay back a loan.
- The Loan-to-Value ratio is an important component you must be aware of before applying for a loan. The LTV ratio is usually used by the creditor to assess the lending risk. An LTV ratio indicates how much property you own with respect to how much you owe. The higher the ration, the riskier is the loan. With higher LTV ratio, it is difficult to get loan approvals and it will cost more to the borrower (higher interest rates are charged). You may even have to insure the loan. LTV ratios higher than 100 are considered riskier.
Loan Tenure and Interest Rates
Most creditors sanction loans to customize payment schedules, where you can choose the duration of loan repayment. Usually, tractor loans have a repayment period of up-to 84 months. The interest rate for a tractor loan can be anywhere from 13% to 20.4%.
Top-Up Loans and Refinance Loans
If you need more money to repay your loans, you can do so by opting for a refinance loan. A refinance loan allows you to switch from a fixed rate to an adjustable rate. Alternatively, if you want to borrow more money over an already existing loan, you can opt for top-up loans.
Loans can be a facilitator of your production and enhance your revenue. However, you need to thoroughly research your tractor loan options to arrive at a financial decision.