Thank you for continuing to follow our series, Farm Service Agency Loans Now Offered at Somerville National Bank. In the past few weeks, we have covered the basics pertaining to Farm Service Agency Loans and the various types of loans that are currently available. If you want to start a ranch or farm, own a ranch or farm, or, require money to expand your current ranch or farm, a loan from the Farm Service Agency may help you! In this week’s installment, we will be covering basic information pertaining to the rates and the terms associated with the loans offered by the Farm Service Agency. If you have an interest in obtaining one of the many FSA Loans that are currently available, continue reading for very important information.
Once you are approved for a loan from the Farm Service Agency or another types of lender – such as Somerville National Bank – it is important to realize that you may not only have to pay back the amount of the loan (principal), but, you may also be held responsible for paying back interest. When you are qualified for your FSA Loan, be certain to determine what amount of interest you will incur on the loan. This interest is referred to as the “rate”.
You should also determine the term. This is the amount of time that you will spend making payment. The amount that you will pay, in total, on interest is directly associated with the interest rate and the term of the loan.
The rate of interest is always displayed through a % symbol. If you have a low interest rate, you will not pay that much. If you have a high interest rate, you will likely be expected to pay back a large amount in interest. If you opt for a loan that is identified as being “fixed”, the percentage rate of the loan will remain the same.
If you have a “variable” rate, it means that the percentage rate of the loan may fluctuate throughout the duration which you spend repaying the money. The direct FSA Loans and the land contracts have rates that are fixed. The guaranteed Farm Service Agency Loans typically have a variable interest rate, but, may have a fixed rate into place.
The overall term associated of the FSA Loan that you obtain will be determined by the manner that you choose to use the monies received, as well as the collateral that you have elected to place for the loan. In most all instances, real estate loans have higher terms than those that are chosen to purchase equipment and supplies.
If you end up with a long loan term, the monthly payments you will be expected to pay will be lower; unfortunately, it means that – in the end – you will pay more for the interest of the loan.