How farm loan interest works
Interest is charged on the balance you still owe, at the nominal yearly rate divided by the number of payments in a year. With equal instalments the payment stays the same, so early payments are mostly interest and later ones mostly repay the loan. With an interest-only loan you pay only the interest each period and repay the whole amount at the end. A crop or operating loan is one payment at harvest: the amount plus simple interest for the term.
Farm income arrives in seasons, so this calculator lets you pay monthly, quarterly, half-yearly or yearly. Specialist agricultural lenders offer repayment and interest-only loans, fixed or variable, over periods from five to thirty years, so check what yours allows.
Worked example: £150,000 over 10 years
Take £150,000 at 7% over 10 years with equal monthly instalments and a 1% arrangement fee. The payment is £1,741.63, so you repay £208,995.26 and the total interest is £58,995.26, of which £10,159.77 is paid in the first year. The fee is £1,500, the interest and fee together cost £60,495.26, which is 40.33% of the loan, and the APR with the fee is 7.47%.
Over 5 years the same loan costs £28,210.79 in interest, over 20 years £129,107.62 and over 40 years £297,430.52, which is why the term matters as much as the rate.
Quarterly, interest-only and crop loans
Paying quarterly suits a farm whose income comes in blocks. £80,000 at 6.5% over 15 years with a 0.5% fee is £2,097.32 a quarter, £45,838.94 of interest in total and an APR of 6.74%. An interest-only loan of £120,000 at 8% over 5 years, paid half-yearly with a 1.5% fee, costs £4,800 each half-year and then £124,800 at the end; the interest is £48,000 and the APR is 8.55%.
A crop loan of £45,000 at 9.5% for nine months with a 1% fee is repaid with one payment of £48,206.25: £3,206.25 of interest, a fee of £450 and an APR of 11.09%, because the interest and fee are charged over only nine months.
To see what paying extra saves, use the farm loan calculator with extra payments.
What this calculator does not tell you
It uses a fixed rate and a level schedule. It does not model a variable rate, a payment holiday, an early repayment charge or grant income, and it does not say whether a lender will agree to the loan. The rate you enter is an assumption: use the rate on your quote and the arrangement fee in your offer.
Use the right country page
This page stays in pounds and uses UK terms: arrangement fee and the APR as the effective annual rate. The country choices above the inputs open separate local pages. Choosing United States opens the US farm loan interest calculator, which uses a loan fee and reads the APR as the nominal rate compounded at the payment frequency. The inputs reset and amounts are not converted.
Inputs for the agri loan interest calculator
Loan amount
The amount you borrow, before any fee.
Interest rate and term
The nominal yearly rate on your quote and how many years you take to repay, up to 40.
How you repay and how often
Equal instalments, interest only with the amount at the end, or one payment at the end for a crop loan, and the payment frequency.
Arrangement fee
A percentage of the amount, paid in cash at the start.
CALCULATOR QUESTIONS
UK agri loan interest calculator questions
How do you calculate interest on a farm loan?
Charge the nominal rate divided by the payments in a year on the balance each period. £150,000 at 7% over 10 years with monthly instalments costs £58,995.26 in interest.
How much interest is paid in the first year?
On that loan, £10,159.77, because most of each early payment is interest.
How is a crop loan different?
It is one payment at harvest of the amount plus simple interest. £45,000 at 9.5% for nine months repays £48,206.25.
Does the arrangement fee change the APR?
Yes. The APR counts the cash you actually receive, so a 1% fee on £150,000 lifts the 7% rate to an APR of 7.47%.
Is a longer farm loan more expensive?
In interest, yes. £150,000 at 7% costs £28,210.79 over 5 years and £297,430.52 over 40, though the payment is lower.
What happens when I change country?
The United States option opens the separate US farm loan interest calculator, in dollars. Your inputs are reset rather than converted.