What is an Installment Loan?
Also known as capital and intermediate term (IT) loans, these loans are used to finance equipment, breeding livestock or other capital items for up to seven years and specialized facilities/equipment for up to 10 years. They can also be used to restructure a borrower’s balance sheet to provide additional permanent liquidity (working capital).
Installment Loans Available
- Farm Equipment and Machinery
- Breeding Livestock
- Irrigation Systems
- Grain Facilities
- Building Facilities
Advantages of Installment Loans
- Fixed, Adjustable or Variable Rates
- Terms Up to 10 Years
- No Prepayment Penalties
- Interest Rate Conversion Option
- Interest-Earning Funds Held Option
Who is eligible for an Installment Loan?
Capital loans are available to a wide range of individuals and entities that are eligible for Farm Credit loans. In addition to full- and part-time farmers, this product can be used for aquatic producers, harvesters of forestry products, providers of farm marketing and processing services, contract growers and farm related businesses.
Many may think of agricultural financing in the Delta area as primarily focused on rice and cotton, but we know local agriculture like global agriculture is diverse. We welcome agriculturalists of all scales. We work with them and their unique operations to better the agricultural economy in Northeast Arkansas and Southeast Missouri. Whether you farm 15,000 acres, raise organic produce to sell at the Farmers’ Market, run cattle, have poultry houses or raise honeybees, we offer agricultural financial products to help you grow and prosper.
Installment Loan Pricing Options
Variable Rate (30 Day Adjustable).
Customer’s rate may change on the first of every month. Customers are notified of rate changes a minimum of 10 days in advance of the effective date of a rate increase and not later than the effective date of the decrease.
Prime Indexed Loans.
The customer’s rate will be indexed to the Prime Rate as reposted in the Wall Street Journal. The rate will be adjusted on the first of every month on the Prime Rate as of the 10th of the previous month. The index margin, which is the difference between the customer’s rate and the Prime Rate, may be adjusted every 3 or 5 years, depending on the option selected. The new index margin and interest rate will be based on the rate charged for new loans which are in the same category (tier) at the time the interest margin is reset. Customers are automatically notified of rate changes 10 days in advance of the effective date of the rate change.
Adjustable rate loans may be priced on 1, 2, 3 or 5 year repricing periods. The loan pricing anniversary date is the first date of the month following loan closing. Adjustable rate loans will automatically reprice at the same interval as the expiring pricing period until final maturity. Customer are notified of the rate change a minimum of 10 days before the effect date of a rate increase and not late than the effective date of a decrease.
The rate is fixed for the entire term of the loan, so there are no balloon payments. Available for terms up to 10 years. An existing loan may be converted to a fixed rate with the remaining maturity period left intact but assigned the rate of equivalent term.
Rate changes are effective each Wednesday. Customers can lock in a rate at the time of the loan application or any time prior to loan closing. Rate commitments are good for 75 days and can be extended for up to 4 additional 30-day periods with the payment of a commitment extension fee.
The loan may be secured or unsecured as required by credit procedures. A single disbursement is usually made at loan closing. However, a budget may be established for future purchases during the operating cycle and disbursement made when purchased are completed. Payments of principle and interest may be made monthly, quarterly, semi-annually, or annually based on an equal or decreasing payment schedule.
Benefits of Installment Loans
Terms up to 7 years if secured by machinery or breeding livestock and 10 years if secured by facility/equipment PAID option.
Automatic withdrawal of payments (pre-authorized installment draft). Longer terms can reduce the size of your payments. This can help improve your cash flow. Our PAID option allows your payment to be automatically deducted from your bank account, which saves you time and gives you peace of mind that your payment will be received on time.
Long term is tailored to the useful life of the asset.
Our loan terms assure that you’re not still paying for an asset that is physically depreciated.
SEVERAL PAYMENT OPTIONS AVAILABLE
You may choose from the three payment options. The first being fully amortized payments with equal installments allowing you to keep your obligations consistent over the life of the loan. A second option is fixed principle payments which allows the payment amounts to decrease over the life of the loan. Or finally, payments can be set up to match your operations cash flow with installments due monthly, quarterly, semi-annually or annually.
Reduce your interest expense by paying interest only on actual funds borrowed.
Presently, we offer a convenient option that allows you to change from one pricing plan to another at any time, something that many lenders will not do. This option is generally less costly and simpler than refinancing.
Commitment extension option: Extend interest rate commitment up to four 30-day periods for a small fee.
Eliminate the risk of rising rates by locking into today’s interest rate, even if your loan won’t close for up to 6 months. This protection is available by paying an upfront fee.
Frequently Asked Questions about Installment Loans
How long will I have to repay my loan?
To determine the maximum loan term for the specific item you want to finance, we consider the item’s useful life. For example, we know that an XYZ tractor generally has a useful life of 5 years. Therefore, you can take up to 5 years to repay that tractor loan. By matching the item’s useful life to the term loan, you’re assured that, down the road, you won’t continue to make payments on an item that is physically depreciated. That makes good business sense for us and for you.
Dealers seldom charge simple interest.
Watch for add-on interest that increases the effective interest rate.
How can a Farm Credit Midsouth loan be better than a manufacturer’s 0% financing program?
Two things must be understood when considering a 0% financing program: The rate on the loan after the no interest period has expired and the ability to take a cash discount in lieu of the 0% offer. In most cases, the rate on the loan after the 0% rate has expired is higher than current market rates. In addition, there is often an option to get a discount on the item being purchased if you pay with cash. Therefore by obtaining a Farm Credit Midsouth equipment loan, you can take advantage of the cash discount and realize lower interest cost over the entire life of the loan.