If you run a farm, a construction company, or a landscaping business, you need a tractor. This versatile machinery can help your business or farm in so many ways that will lead to higher turnover. Sadly, most business and farm owners might not have the money to afford a tractor, as they are quite pricey.
This is where a tractor loan can be very beneficial. With this type of loan, you can secure the funds you need to buy that tractor that you so desperately need. You can visit https://www.forbrukslån.no/lån-til-traktor/ to learn more about the different types of loans individuals can access. Therefore, in this article, we will reveal all that you need to know about a tractor loan and how to secure one.
Tractor Usage in Norway
In Norway, there are over 260,000 operational registered tractors. While this might seem like a big number, the fact is that many farms and businesses are still in need of one. On farms, large tractors can travel long distances to carry out all sorts of farming tasks and operations. The smaller ones, on the other hand, can be used in housing associations and nurseries.
For a farm to make a profit, it has to use at least one of these machines. This is necessary and has nothing to do with how big the land area is. In forestry, these machines are also used, especially to transport feed from one location to another.
Construction companies use them for their construction work and other industrial tasks. The reason a tractor can be used in so many ways and in different industries is because of its design. This machine can be used to push, pull, or carry loads, thereby making it very versatile. Because of how important they are to a business, borrowing money to buy one is always a good idea, provided you make informed decisions when borrowing the money.
Consumer Loan
Consumer loans allow you to borrow money that you need urgently. They are ways people get out of an emergency they didn’t plan for or imagine would happen. Let’s say you are in the harvest season, and you suddenly realize you won’t be able to harvest all the crops manually on time. In such a case, you can’t wait to save up the money you need to buy a tractor.
If you try that, your crops might get overripe or over mature and spoil, causing you to lose money. Therefore, the best option is to apply for a consumer loan to help you harvest your crops. The loan cost will make up the tractor’s cost and not just the actual cost when you are doing your account.
Tractor Loan Types
If you’ve made up your mind to borrow money to secure this machinery, you need to know about the types of credit you can secure. In this section, we will discuss in detail what these loan types are. Let’s get into it.
Secured
This type is not as common as the next one, but it is still used by many and has its advantages. When you choose a secured credit, you’re doing so by placing a pledge or collateral on the vehicle you want to buy. This means that the lender can collect the machine from you if you default. The lender considers safety when lending the money to you and this has nothing to do with whether the tractor is used or new.
It is necessary that the tractor is registered and must be used only for commercial purposes. This will enable the lender to impose a lien in case of a default on your part. Furthermore, you need to have liability insurance and comprehensive insurance.
If you choose a secured tractor loan, you have a maximum of seven years to repay the loan. The interest rate of a secured credit is much lower and better than that of an unsecured credit. The simple reason is that the lender is not at great risk of losing their money as they can collect the vehicle if you default. This lower interest rate is a great advantage for anyone looking for cheap deals.
Unsecured
A consumer loan can be secured or unsecured but many opt for the latter option because they don’t have collateral they can provide. Even owners of real estate who want to present their property as collateral might find it hard to do so because of certain requirements. For instance, Mortgage Loans Regulations mandate that you cannot mortgage a property for an amount exceeding 85% of its appraised value. So, in such a case, most people turn to unsecured credit to buy the tractor they need.
The challenge with this type of credit is the higher interest rate, which is normal because the lenders are giving you money without any collateral. The interest rate you’ll be charged depends on your credit score. Therefore, if your credit score is high, you’ll get a lower rate. On the other hand, if your credit score is low, the rate will be high.
How to Secure a Low-Interest Tractor Loan
One mistake that many people make when applying for a tractor loan is that they take the first offer they find. This is a mistake you should avoid because there might be better offers with lower interest rates and overall costs. Therefore, you need to take your time reviewing different offers before you make a choice. In this section, we will show you how to get the best loan offer.
Before you even begin the process of looking for credit, you need to create an accurate budget. In the budget enter your income and your expenses. Then determine how much you can afford for the monthly repayment. This will help you know the type of credit you can comfortably pay back.
If you can’t do this, try an online loan calculator. While such calculators won’t give you the exact amount you’ll repay, they will give you an idea of how much you should expect to pay back monthly. After you’ve done that, begin the application process by doing the following:
Choose the Amount You Want to Borrow
This first step depends on the budget we asked you to create. Furthermore, the amount you want to borrow depends on how much the tractor you want to buy costs. After all, it makes no sense to borrow money that won’t purchase the tractor except you need the money to balance what you already have.
You can also determine how long the repayment period should last. The shorter the repayment period, the lower the total loan costs. Therefore, it’s always good to choose a short repayment period. Nevertheless, if you know you won’t be able to meet up with a short repayment period, then you can stick with a long period.
Worthy of mention is the fact that some banks allow you to pay above the agreed amount for each month without incurring additional fees. We advise that you choose such lenders. Doing this will help you pay off the loan faster whenever you have more money at the end of the month.
Send your Application to Different Lenders
Don’t send your application to a single lender. Also, don’t send your application to different lenders at different times. Sending it to one lender means you only get one offer without options. In the same vein, sending it at different times to different lenders might affect your credit score.
Therefore, you need to send the application at the same time to every bank you have in mind. Each bank will then process your application and send back an offer. It is guaranteed that you will get different offers with varying terms. The offer you get depends on several factors, chief among them is the assessment approach the bank uses.
Select the Best Offer
How do you know the best offer? Simple, you compare all the loan offers you received. Find an offer that offers the amount you need, has a low interest rate, with a favorable repayment period and affordable monthly repayment. When comparing the interest rate, your focus should be on the effective interest rate rather than the nominal interest rate.
Conclusion
Tractors are important for farms, construction companies, and landscaping businesses. However, buying them might not be easy without securing a loan. In the article above, we’ve discussed in detail all you need to know about tractor loans and how to get the best loan offer.
