5 Things You Need to Know About Tractor Loans
Many banks and non-banking financial companies (NBFCs) offer tractor finance. You may use the loan to buy new or second-hand tractors to meet all your farming needs. The interest rates and repayment tenure of these loans vary among lenders. Read on to know some important aspects of these loans.
Things to know about tractor loans
A tractor loan enables you to purchase the equipment you need to improve production and grow your farming business. However, there are a few things that you must keep in mind before availing of finance. The below list can help you make an informed decision.
1. Interest rate
The interest rate on any loan must be your primary concern. If it is high, your repayment amount will be significantly increased. The interest rate varies among lenders, and they decide it based on your credit score, tenure, and loan amount. Hence, you must compare the tractor loan interest rates of different financial institutions before choosing one. Presently, the interest rate offered by different lenders ranges between 8.80% and 20%.
The loan tenure differs between lenders. You may choose a repayment period of three months to five years, depending on your requirements. If you select a longer tenure, the equated monthly installment (EMI) amount will be lower. However, your overall repayment amount might be higher in the long run.
3. Other charges
The interest rate is not the only aspect you must consider while choosing a lender. They also levy various charges associated with tractor financing, which include fees for processing the tractor loan documents, the penalty for a delay in EMI payment, pre-payment charges, and much more. Thus, you must understand these charges before availing of a loan.
Some financial institutions require you to submit collateral or security to get the loan. However, there are some lenders that do not require any collateral. So, you must compare and choose one according to your requirements.
Most lenders finance up to 90% of the tractor’s price, and you need to pay the remaining amount out of your pocket. Ensure that your creditor does not expect you to pay higher than 10% of the price. Otherwise, it will put a dent in your savings.
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