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An integral part of agricultural activity and farming is having a tractor. It is also used for other purposes. It plays a very important purpose of transferring produce from farms to the market. Also, it helps in transporting supply materials from the market to the place of produce. In villages it is also used as a means of transport for people to move from one place to another. Many banks have acknowledged the need for financing this very important equipment. Not only banks but NBFCs (Non-Banking Financial Companies) and other financial institutions extend this type of loan. The loan finds good demand in the rural and semi-urban parts of India. While one can avail vehicle loan from banks to fund their tractor, the tractor loan which is specially customized to provide favorable terms would prove to be advantageous.
About Tractor Loan
Tractor loans fall within the category of agriculture loans. This loan can be applied by an individual or group of individuals. The repayment can be done by the entire group of individuals or by a single individual within the group. This loan follows the equated monthly installment (EMI) schedule. This is a secured loan and is like that of vehicle loan. In the event of default, the tractor will be taken into possession by the financier.
There are specific eligibility criteria for availing tractor loan, it may differ from one lender to another. However, there are some standard requirements which are as mentioned here –
The key features which demarcate tractor loans from other form of loans are –
These are the key benefits that can be availed on tractor loans –
Tractor loans are secured loans where the tractor itself is the collateral. Hence, the processing and disbursement of tractor loan is quick and hassle-free.
The applicant has the option of applying online for this loan. The documents will be physically verified. The disbursement and subsequent communications are done through phone or email.
This loan falls within the priority sector loan. It is a part of the agriculture sector; hence the interest rates are lower as compared to that of vehicle loan. While vehicle loan can also be used for buying commercial vehicle such as tractor, the tractor loan is offered at a much lower interest rate. Thus, it is a more feasible option.
The documentation is quite standard in the case of tractor loans. The priority sector loans and secured loans are processed faster. The usual proofs – identity, address and income proofs are required to establish authenticity of the applicant.
Below is the list of documents required for availing tractor loan. It may vary slightly across vendors, however, most of the documents listed here would be required. Depending on the loan quantum, income stability and credit score of the individual, the documents required may vary marginally.
Acceptable documents include Aadhar Card, Voter ID Card, PAN Card, Passport, Driving License, Aadhar Card, Govt. issued document + Photograph, Bank Sign Verification + Photo
Accepted documents are - Voter ID Card with Date of Birth, PAN Card, Passport, Driving License, Aadhar Card, Govt. issued document with date of birth, Marks Sheet with date of birth
Electric Bill, Tax return, Water Bill, Sale document, Possession Letter
ITR, Bank statement for past 6 months
Both these loans can be used to purchase tractor, however, there are certain benefits and drawbacks for choosing one on top of the other. The features of both are listed below –
1. Can the borrower foreclose or make part pre-payment towards the loan?
The borrower can foreclose or make part pre-payment subject to penal interest on the loan. The penal interest may vary based on the lender. Typically, the penal interest for foreclosure or pre-payment within 12 months from the date of disbursement will be higher than after the 12-month period.
2. Is a guarantor required for tractor loans?
This is a secured loan, hence, the tractor and additional collateral in the form of agricultural land is provided as security. Hence, there is no requirement of guarantor. However, some banks insist on a guarantor when the borrower is unable to bring in additional collateral in the form of agricultural land.
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