Advantages of Tractor Loans for Farmers in India

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By Priya SinghUpdated On: 12-Oct-2023 11:12 AM

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ByPriya Singh |Updated On: 12-Oct-2023 11:12 AM

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Tractor loans offer numerous advantages that can help farmers in India and improve their standard of living. In this article, we will discuss the advantages of tractor loans for farmers in India.

Agriculture is the backbone of India's economy. Almost 58% portion of the total population is dependent on agriculture for their livelihood. Tractors have revolutionized the agricultural industry, making farming more efficient, and productive, with less manpower. However, the high price of tractors in India can be a major obstacle for many farmers. This is where tractor loans come into the scenario.

Tractor loans offer numerous advantages that can help farmers in India and improve their standard of living. In this article, we will discuss the top advantages of tractor loans for farmers in India.

What do you understand by the term “tractor loan”?

A tractor loan is a sort of financing used to assist farmers in purchasing tractors. Typically, these loans are provided by financial institutions, banks, and cooperative organizations. These organizations provide loans to farmers to purchase a new tractor or an old tractor and return the loan with interest over a set period of time. The main aim of providing Tractor loans is to make tractors more accessible to farmers, allowing them to modernize farming processes and increase output.

Benefits of Tractor Loan

The advantages of a tractor loan are mentioned below:

Increased productivity

A tractor can increase your productivity. You will have more time to devote to other farm work as your productivity increases. A tractor equipped with a cultivator, rotavator, sprayer, and thresher is also useful. It is significantly more efficient than using farm animals in farming. It also speeds up the procedure. As a result, you can save valuable time.

Budget Management

Buying a tractor can be a heavy investment. If you are a farmer wanting to purchase a tractor, you have to save money for such a heavy investment. This might be a time-consuming procedure. Even then, you will need to make a down payment when purchasing the tractor. However, if you take a tractor loan, you will have a lender who will share the cost with you. As a result, you can avoid the time spent on saving for the expense of a tractor. Furthermore, your initial investment will be reduced.

Accessibility

Farmers have to rely on traditional methods of financing to buy tractors or any other agricultural machinery. You can get a modern financing solution with tractor loans. Tractor loans provide farmers with a low-cost way to purchase a tractor. Farmers can take a loan and return it in instalments rather than paying the total sum at one time. It reduces farmers' financial burden and allows them to allocate funds to other important farm needs.

Customized tractor loans

Financial institutions recognize the needs of farmers and provide customized lending solutions. These loans are tailored to the agricultural sector's specific demands, taking into account aspects such as crop cycles, income patterns, and repayment capacity. Farmers can select the loan amount, repayment term, and mode of repayment that best suits their financial circumstances.

Improved Crop Yields

Tractors are equipped with various attachments and implements that enable farmers to prepare their fields more effectively. As a result, it leads to improved soil quality and crop yields. Tractors help farmers to manage their fields in an organised manner, reducing the risk of crop diseases and weeds. All of the above-mentioned factors contribute to higher crop yields. This gives food security and increased income to farmers.

Flexible Repayment Terms

It helps farmers accommodate their revenue patterns. Seasonal repayment options may be available from banks and other financial organizations, allowing farmers to make larger payments during the harvest season when their revenue is higher. This flexibility ensures that farmers may repay the loan without affecting their budgets and expenses.

Access to Advanced Technology

Tractor loans allow farmers to purchase cutting-edge tractors. GPS navigation, precision farming tools, and attachments for diverse agricultural tasks. Using such technologies, farmers may optimize their operations, decrease waste, and increase overall efficiency.

Options for Collateral

Financial companies frequently make tractor loans against collateral such as land, gold, or other valuables. It enables farmers without solid credit histories or formal financial records to obtain finance. Lenders decrease their risk by using collateral to make loans to farmers who do not have access to standard banking services.

Repayment Methods

While tractor loans can help with initial buying costs, what about repayment? Lenders offer tractor loans to those farmers who can repay the borrowed amount on time with interest. If a farmer takes a tractor loan, he can conveniently repay the principal and interest amount using Equated Monthly Instalments (EMIs).

As a result, the loan amount is divided into small amounts which you have to pay monthly or the plan you choose to pay. You may also use internet calculators to calculate the EMI you are comfortable with paying ahead of time. Negotiating conditions with the loan assists you in determining the offer value and tenure.

Also Read: Empowering Farmers: SBI Agriculture Loans for Sustainable Growth

Eligibility Criteria for a Tractor Loan

The first and most significant consideration when applying for a tractor loan is your credit score. As a result, you should get your credit score reviewed. The interest rate, disbursement amount of the loan, and repayment duration all depend on your credit score. A credit score reflects how well you handled previous loan repayments. A good or low credit score has a significant impact on the likelihood of obtaining a tractor loan.

A credit score ranges from 0 to 900. Let's take a closer look at the credit score scale:

• A credit score of 750 to 900 is considered good and it's a high chance that you will get the loan.
• A credit score of 550-750 is considered normal and there is a 50-60% chance that you will get the loan.
• A credit score of below 550 is considered poor.

Documents Required to Apply for a Tractor Loan

The following documents are necessary to apply for a tractor loan in India:

• Pan Card
• Age Certificate (to verify whether you are 18+ or not, as loans are offered only when you are 18+ years old)
• Aadhar Card as your address proof
• Proof of landholding
• Quotation of tractor issued by the dealer to customers.

You can easily apply for a tractor loan if you have these documents and a strong credit score.

Also Read: Agricultural Loans in India - An overview of the National Bank for Agriculture and Rural Development (NABARD)

Conclusion

Tractor loans are an important financial tool for Indian farmers, allowing them to purchase tractors and improve their farming operations. These loans provide increased production, low-cost financing, flexible repayment periods, access to cutting-edge technology, and higher crop yields.

Tractor loans help the agricultural industry flourish in India by providing farmers with the means to invest in tractors. The tractor loans have enhanced the farmers' lives and helped them to modernize their farming operations.