Using the Loan Payment Calculator
The best loan for your farm or piece land is the one that cash flows. Use our farm loan payment calculator to explore which loan terms and payment options best fit your operation.
The loan payment calculator is a good first step in the lending process, allowing you to see how the structure of a loan impacts your payments and cost of ownership.
Four primary factors influence your loan payment. Each is reflected in the calculator.
- Loan amount. How much you expect to borrow is the single biggest determinant of your payment.
- Payment schedule. Farm Credit Services of America offers options that reflect the unique needs of agriculture: Monthly, quarterly, semiannual and annual.
- Loan term. The length of a loan varies by type. Some loans have terms of one to seven years or seven to 10 years. Terms on our land loans typically fall between five and 30 years.
- Interest rate. Market conditions, inflation and credit risk are just a few of the factors that influence your final interest rate. Among the advantages of borrowing from your financial cooperative: Farm Credit Services of America contacts you if rates drop and we can save you money. Our cash-back dividend payment on eligible loans also helps to reduce the cost of borrowing from us.
Even and Decreasing Payments
Now that you have estimated the four primary factors that determine your payment, it is time to explore a lesser-known aspect of borrowing. A portion of every loan payment goes to principal, or the amount of money you borrowed. The remainder is applied to interest, or the amount owed to a lender for using their money. The difference between even and decreasing payments will impact both the amount of each payment and total interest paid.
Even Payments: When borrowers elect an even, or level, payment, a larger portion of your payments go toward interest at the beginning of the loan term.
Decreasing Payments: By selecting a decreasing payment schedule, a borrower pays down a set amount of the principal each year, requiring higher payments up front. But interest payments shrink over the life of the loan, as does the amount owed for principal. Our calculator shows you how this plays out in the amortization schedule.
Consider a $100,000 loan with 7% interest and annual payments for 20 years. If you choose an even payment schedule, you pay about $9,500 a year for a total loan cost of $190,215, with about $90,000 of that going to interest. The same loan would cost a total of $174,521 under a decreasing schedule. Interest would total about $74,500 over the life of the loan and the first payment would be about $12,000, decreasing each year to a final payment of $5,354.
Next Steps
As we mentioned, the loan payment calculator is a good first step in the lending process. The next step would be to apply for a loan online or having a conversation with one of our financial officers to ensure you get the best loan for your financial goals and needs. Visit our Contact page to find your local office.
