10/21/2025: What to Know Before Financing Large Agricultural Equipment

Whether you are looking to finance a combine or a new tractor, you cannot be expected to make an informed decision without knowing potential loan terms, costs, and other requirements. If you are in Terre Haute, IN, or the surrounding area, we can help you as you explore your options for farm equipment loans.

What to Know Before Financing Large Agricultural Equipment

Types and Terms of Farm Equipment Loans

Farm equipment loans come in various forms, including fixed-rate, variable-rate, or lease-to-own options. Fixed-rate loans offer predictable payments, while variable rates will fluctuate with market conditions. Loan terms typically range from one to seven years, depending on the equipment’s cost and expected lifespan. Shorter terms mean higher monthly payments but lower total interest.

Assess Total Costs

Beyond the loan’s principal, consider interest rates, fees, and maintenance costs. Interest rates vary based on credit scores and lender policies, often between 4% and 10%. Origination fees or prepayment penalties can add to expenses. You will also need to factor in equipment upkeep, as large machinery will require regular servicing, and this will impact long-term budgeting.

Evaluate Your Financial Position

Lenders will assess your credit history, income, and debt-to-income ratio before approving loans. A strong credit score, typically above 650, will secure you better rates. You will need to provide detailed financial records, including tax returns and farm revenue, to demonstrate repayment ability. Lenders may require a down payment, often 10-20% of the equipment’s price, so it is important to plan for these upfront costs.

Consider Equipment Lifespan and Resale Value

Large equipment depreciates over time, which affects the value of the loan. You may wish to choose machinery with a strong resale market to retain value if sold later. It is wise to research brands known for durability, as longer-lasting equipment justifies financing costs. Check warranty terms and service availability to minimize repair expenses during the loan period.

Plan for Cash Flow and Repayment

It is possible to align loan payments with farm revenue cycles, such as harvest seasons, to ease financial strain. Seasonal payment plans, available through some lenders, allow you to make larger payments when income peaks. Avoid borrowing more than you need, as high payments can strain your budget during low-yield years. Use budgeting tools to track cash flow and ensure timely repayments.

Review Contract Details

It is important to read your loan agreement carefully to check for hidden fees or restrictive clauses. Make sure that you understand whether or not there are penalties for late payments or early payoff. To avoid disputes, be sure to clarify ownership terms, especially for lease-to-own deals.

Find Out More About Farm Equipment Loans in Terre Haute, IN

At Prospect Bank, we offer a suite of financial services tailored specifically to the needs of farmers.

We understand the amount of money involved in purchasing agricultural equipment, and also the unique position of farmers in our economy. To find out more about how we can help you finance farm equipment in a way that balances costs with operational needs, get in touch with us at Prospect Bank.