Introduction to Agri- Loans with Collateral

Farmers in India incur massive expenses while cultivating crops. Most of the time, they barely make profits and struggle to repay their debts. We have heard the cries of the agriculturists in India lamenting about the low prices they get on their produce, the high cost of manure, and lack of water.

To continue farming, they land up borrowing from private lenders who charge a very high rate of interest which makes things worse. To help farmers in India by offering them financial aid when required, many banks in India offer agriculture loans.

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What is a Loan Against Agricultural Land?

If a farmer has a piece of land in his/her name, that can be used as a collateral to obtain a loan from a bank or a financial institution. When a borrower pledges an agricultural land for money it is called as “Loan Against Agricultural Land” or “Agriculture Loan”.

Features of Loan On Agricultural Land

• Loan Against Agricultural Land is specially designed for people who cultivate crops like farmers, planters, or Horticulturists. It cannot be availed by a businessman or a professional.
• Usually, the farmer does not have to furnish Income Tax Returns to apply for this type of loan.
• It requires minimum documentation.
• The loan tenure goes up to 20 years with many banks.
• There are no hidden charges on Agriculture Loans.
• The lender usually works out a flexible repayment plan considering the farmer’s situation.
• The turnaround time is fast and the banks are sensitive to the harvest season.
• The borrower can use the funds for agricultural purposes like food processing, buy an agricultural equipment, set up dairy units/fisheries/rice mills, or for micro-irrigation.
• They can also use the funds to set up a greenhouse, cold storage, or a horticulture centre.
• To buy agriculture insurance to protect from crop losses.
• You can use the funds to buy livestock or cover your marketing and operating expenses.

Eligibility Criteria for Loan Against Agricultural Land

• Farmers, Dairy Owners, Horticulturists, and any Orchard owners are eligible to apply for an Agriculture Loan.
• Most lenders prefer the age of the applicant to be within 24 to 65 years of age. However, there are few banks who offer loans to applicants are 18 years of age. The eligibility differs from one bank to another.
• If the land is owned by two people, co-applicant is mandatory.
• A agricultural land is pledged as a collateral. The borrower should have clear titles to the land to be eligible to apply for a Loan Against Agricultural Land.
• Usually, lenders prefer borrowers to have residence stability of 2 years.
• Most banks offer loans based on the size of the land pledged. They usually mention the minimum acres of land a farmer should have to apply for a loan.