Farms need funds. Agricultural loans support farmers from their day-to-day expenses to expansion and production shifts. There’s no better way to know if you can afford your loan repayments for your next
wheat harvest than having an agricultural loan calculator by your side.
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Why You Need an Agricultural Loan Calculator
Who needs agricultural loans, first and foremost
backyard homesteaders, commercial farmers, part-time farmers. They all need loans so they can cultivate their corn, soy, wheat and more, or raise poultry and cattle for food and production.
The terms of this financing type vary depending on your loan characteristics. They can come from private commercial banks and the U.S. Department of Agriculture. Notably, government-backed agricultural loans can be made by private lenders that process the loan for guarantee by the relevant agency.
Generally speaking, agricultural loans have these features:
- You can borrow at least $400,000.
- You can repay the loan between 15 and 30 years.
- You can use the loan to finance a start-up farm to that with an established production.
It’s easy to think of borrowing this much for your farming activities. But it’s hard to visualize what the monthly payment would look like until you see dollar signs flashing.
Range of affordability
The all-important question when it comes to loans is: Can you afford the monthly payments?
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This question and more can be answered by an agricultural loan calculator. It’s a practical tool meant to tell you whether your loan is in your range of affordability. While it’s true that your lender will have the final say on your rate, it won’t hurt to try out various rates just to see how much your loan would cost.
The agricultural loan calculator works like a mortgage calculator in that you can input the following information:
- Principal: This pertains to the amount or capital you will be borrowing for your equipment and machinery, seeds and related farming supplies.
- Interest rate: This is the finance charge for the principal.
- Term: This is the period you are required to pay back your loan.
- Payment schedule: This is a graph or a table showing how each monthly payment is applied to the loan until the maturity date.
You take out a $500,000 loan at a fixed rate of 4.10% a year with a repayment term of 30 years. Input these numbers on the agricultural loan calculator and your monthly payment is $2,415.99. Overall, you will pay $869,757.07, including the interest of $369,757.07.
The payment schedule can break down where your first up to the last monthly loan payment will go. The results will change of course if the interest rate is not fixed as most calculators are based on a fixed-rate loan.
A variable-rate agricultural loan will change depending on its specified adjustment periods occurring in the life of the loan. When the rate changes – it could go up or down, the monthly payment also adjusts.
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