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 payments the amount stays the same, so early payments are mostly interest. With an interest-only loan you pay only the interest each period and repay the amount at the end. An operating loan can be one payment after 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. USDA Farm Service Agency publications describe direct farm ownership loans of up to $600,000 over up to 40 years and direct operating loans of up to $400,000 over up to seven years; check the current limits and rates with your local FSA office or Farm Credit lender.
Worked example: $150,000 over 10 years
Take $150,000 at 7% over 10 years with equal monthly payments and a 1% loan 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, as the nominal annual rate, is 7.23%.
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.
Half-yearly, interest-only and operating loans
Paying half-yearly suits a farm whose income comes after harvest and sale. $350,000 at 6.9% over 20 years with a 1% fee is $16,262.66 every six months, $300,506.59 of interest in total and an APR of 7.03%.
An operating loan of $250,000 at 8.25% for one year with a 1.5% fee is repaid with one payment of $270,625.00: $20,625.00 of interest, a fee of $3,750 and an APR of 9.90%, because the interest and fee are charged over a single year.
To see what paying extra saves, use the farm loan extra payment calculator.
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, a prepayment penalty or program rules, and it does not say whether a lender will approve the loan. The rate you enter is an assumption: use the rate on your quote and the fee in your offer.
Use the right country page
This page stays in US dollars and uses US terms: loan fee and the APR as the nominal annual rate compounded at the payment frequency. The country choices above the inputs open separate local pages. Choosing United Kingdom opens the agri loan interest calculator, which uses an arrangement fee and reads the APR as the effective annual rate. The inputs reset and amounts are not converted.
Inputs for the US farm 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 payments, interest only with the amount at the end, or one payment at the end for an operating loan, and the payment frequency.
Loan fee (origination)
A percentage of the amount, paid in cash at the start.
CALCULATOR QUESTIONS
US farm 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 payments 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 an operating loan different?
It can be one payment after harvest of the amount plus simple interest. $250,000 at 8.25% for a year repays $270,625.00.
Does the loan 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 7.23% on a US page.
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 Kingdom option opens the separate agri loan interest calculator, in pounds. Your inputs are reset rather than converted.