Agricultural Loan Calculator

Agricultural Loan Calculator

According to the USDA census, taken every 5 years, there are over 9 million acres of land in the United States being used for farming. These acres produce wheat, corn, soy, fruit, vegetables, livestock, and countless other items stocking grocery store shelves, farmers markets, and countless other establishments.

Every person is touched by farming in some way whether they realize it or not. From a patio herb garden, to hobby plots, to large-scale farms, farming is an integral part of the American way of life. Even if a person doesn’t grow or raise anything themselves, they are touched by farming. It is an enormous part of the country’s economy and is in part, responsible for our seat at the world’s table.

For those who are seeking to get into agriculture or for those who are already farming, but need a financial boost, you may consider borrowing capital from a lender such as a bank, broker or the USDA.

As a first-time farmer who needs to acquire land, or a veteran farmer who needs some monies for day to day operations or expansion, borrowing the capital may be a great option. Or, perhaps, your situation is a bit different and you are looking to refinance and/or consolidate your current farm mortgage loans and debt to obtain a better rate and term.

Agricultural Loan Types

There are a couple different types of loans you may be looking at. A commercial farm loan typically has to be secured with real estate and has a principal borrowing value of at least $400,000. Much like regular mortgages, they oftentimes come with a 15 or 30 year borrowing period and the terms of repayment may vary by loan or lender. These are the most likely loans for a person beginning a brand new, medium to large-scale farm.

For people who aren’t running a huge farming operation, and are perhaps hobbyists or backyard homesteaders, there are also part-time farmer loans. These people typically have a smaller acreage, are sometimes starting beehives, or maybe raising chickens for the eggs.  These loans are designed for people who have a residence on their property already, aren’t looking to do large-scale production and typically earn an additional non-agricultural related income.  

No matter what your situation is, or how much capital you feel you need to borrow, consider using an agricultural calculator to help you be prepared for different financial scenarios.

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Agricultural Loan Calculator Tool

An agricultural loan calculator is a tool, often available for free use online, that you can use to help you determine your loan repayment. You can input several different situations to create different outcomes and have a deeper understanding of what your repayment situation may be.

This tool takes several factors into account in order to give you an approximate monthly payment.

To calculate your approximate payments, you would do the following. To begin, you will put the principal, or loan amount, that you will borrowing from your bank, broker, USDA, or other lender. This is the money that you are asking for without the added interest.

Next you would enter your interest rate. Here, you can try several different rates, if you aren’t sure what you qualify for, and it will change the outcome of your monthly payment.

The other way to look at this is if you must stick to a particular repayment each month due to your budget, and are worried that you may not qualify for a very low interest rate, it can help you determine how much you can afford to borrow to begin with.

From there you will put in your amortization period. Amortization is an accounting term. It refers to the process of allocating the cost of an intangible asset over a period of time.

For the sake of loan repayment, it refers to the repayment of the loan principal over a period of time. Many of these calculators, will allow you to look at the repayment amount in a monthly, semi-annual, and annual amount.

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Agricultural Loan Calculator Repayments

Some of these agricultural loan calculators will even break your repayments down by year. It will show you the amount of principal and interest you can expect to pay each month, oftentimes you will pay more interest in the initial years, and more principle in the later years. These mortgage loan calculators will often show you the total cost of the loan over its lifetime as well.

For instance, perhaps you borrow $500,000 at a 4.1% interest rate over a period of thirty years. Your monthly payment would work out to $2,415.99 each month, with a total interest payment over the lifetime of the loan of $369,757.07. This would mean your total loan cost would be $869,757.07.

As stated above, these agricultural loan calculators will also oftentimes show you each year what you can expect to pay. For instance, in the above scenario, in the first year of that loan you would pay $8,653.31 on the principal, but you would be paying $20, 338.59 out of the interest owed.

At the end of the year your principal balance would be just over $491,000. However, by the last year of the loan, your interest payment would drop to $1,771.00 and your principal payment would be $27,220.91.

After reading the above scenario, borrowing the principal may seem like a daunting venture. But remember, no matter what type of farm you would like to start, chances are you will need to take out a loan.

Even when farms are passed from generation to generation, sometimes they need a loan to expand, help with day to day costs, or overhaul their operation. Whatever situation you face, having all the information you can is helpful.

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Using An Agricultural Calculator Tool

Using an agricultural loan calculator to create different financial scenarios for your loan can help you be armed with information you need when approaching a bank, broker, or other lender to borrow your capital.

Each institution will have its own set of rules in lending, and will offer you different terms, so it is best to shop around. For instance, most institutions will offer a fixed rate loan. This means that your interest rate is the same each month over the lifetime of the loan.

Many banks and brokers also offer variable rate loans. This means that over the lifetime of the loan, the interest rate may change based on market interest rates.

Using an agricultural loan calculator to help you determine monthly payments on a variable rate loan is much more difficult. This is because it is difficult to predict what the markets will do month to month. When the interest rate changes, it changes the monthly payment that you will owe, fluctuating oftentimes without a pattern.

Regardless of what lender you choose, what type of loan you choose, the interest rates you may qualify for, or how much principal you borrow, an agricultural loan calculator is a good tool to have in your back pocket. Using this type of tool can help you determine the best financial case for yourself, your family, your wallet, and your future farm.

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