How to get Finance for Tractor Purchase

Overview of a Tractor Loan 

A tractor loan is a type of agricultural loan that can be applied by an individual or a group for purchasing a tractor. The repayment of a loan can be done by an individual within the group or by the entire group. This loan also follows the similar format of EMI as any other loan. However, in case of default, the possession of the tractor will be taken by the bank or financier.

Who is Eligible for a Tractor Loan?

To avail of a tractor loan, there are some specific eligibilities that one has to meet. However, it may vary from one lender to another. Below we have mentioned some standard requirements that have to be followed for lending loan against a tractor in India-

1. Any Indian resident above 18 years of age can apply for a tractor loan.

2. Both an individual or a group of individuals can apply for it.

3. Business entities can also apply for a tractor loan.

4. An individual must submit income proof and repaying ability to the lender to apply for this loan.

5. An individual must hold land of 2 acres to avail of the benefit.

Top Features of a Tractor Loan 

Some of the top features of a tractor loan are as follows-

1. The primary security of the tractor loan is possession of the tractor and its related accessories.

2. In India, you must have at least a third-party commercial tractor insurance policy to legally drive a tractor.

3. The margin percentage on the tractor loan starts from 15%.

4. Tractors and their related accessories are considered collateral security. Also, the lender can ask for additional security in the form of farmland.

5. Under this type of loan, interest is charged at a minimum of 12% per annum.

6. The loan tenure can be up to 7 years along with a grace period of one month.

7. The lender can ask for repayment of the loan in various intervals of EMI's i.e. monthly, quarterly, or half-yearly.

8. The loan value is up to 90% of the tractor's value, and the processing charge applicable on this type of loan is around 0.5% of the total loan amount.

9. Usually, banks offer cover for accidental death or permanent disability of their customer as a complementary in their commercial vehicle insurance policy purchased by the customers. 

10. Some banks can extend the loans without any effect on collateral security.

11. In the loan documents, the repayment of loan terms & conditions includes flexible tenure of 12 to 84 months, interest rates, and multiple choices for repaying the amount. 

12. Anyone can apply for tractor loans who meet the eligibility criteria.

Merits of Applying for a Tractor Loan 

Below we have discussed the merits of tractor loans-

1. Low-Interest Rate 

As it is a type of agricultural loan, so the interest rates are comparatively lower than any other type of loan. Also, the tractor falls under the category of commercial vehicle, so the loan is offered at a lower interest rate. 

2. Easy Processing and Procurement Process

Tractor loans are secured loans because the tractor is itself set as collateral security. Therefore, the process and procurement of tractor loans are fast and hassle-free. 

3. Online Transaction 

You can easily apply for a tractor loan online. However, the document verification will be done physically. The procurement and follow-up communication is done through calls or emails. 

4. Effortless Documentation Process

While applying for tractor loans, you will enjoy a hassle-free documentation process. The bank or any other financial institution will provide full assistance during the process as they are priority sector loans. All you need is to submit the usual proofs like- identity proof, ownership proof, age proof, and income proof. 

Types of Documents Required for a Tractor Loan 

The documentation part usually depends upon the lender. Below we have given a list of usual document proofs asked by any authorised banking and financial institutions-

1. Age Proof 

For age proof, you can submit any of these documents- a voter ID card, aadhar card, passport, Driving License (DL), any government-issued documents with mentioned date of birth, or mark sheets of high school or intermediate with a date of birth.

2. Ownership Proof 

Any water bill, electricity bill, tax return, possession letter, or sale documents.

3. Identity Proof 

To prove your identity, you must have these documents- a voter ID card, aadhar card, passport, Driving License (DL), any government-issued documents with mentioned date of birth + photograph, passport size photograph, and bank sign verification. 

4. Income Proof 

A bank statement for the last 6 months or ITR can be submitted for income proof. 

Do You Need Commercial Tractor Insurance Policy?

If you are a farmer or an individual who wants to drive a tractor, having third-party commercial tractor insurance is mandatory as per the law. A commercial tractor insurance policy is a type of commercial vehicle insurance policy that protects your tractor from any financial losses or damages that might arise in an accident. 

If you want a tractor to refinance a loan, it is mandatory to have a commercial tractor insurance policy. In case you have an expired tractor insurance policy and want a tractor to refinance, then you must renew your commercial tractor insurance policy first. 

Final Thoughts 

Before applying for a loan against a tractor, check all the eligibility criteria mentioned in this article. Also, make sure you choose an authorised bank or financial institution. Also, make sure you have the right commercial tractor insurance to protect your tractor from several risks.