Get Easy Finance for Your Farming Needs with Tractor Refinance

Table of Contents

• Introduction
• What is Tractor Refinance?
  • What is Hypothecation?
• What Determines the Loan Amount Under Tractor Refinance?
• What are the Eligibility Criteria for Tractor Refinance?
• What are the Documents Needed for Tractor Refinance?
• What are the Features & Benefits of Tractor Refinance?

Introduction

Farmers in India are prone to risks arising from uncertainty of nature, which impact their crops and subsequently their income. As a result, they may face liquidity crunch or may not have enough income to meet their personal needs or further farming requirements like buying seeds for subsequent crop season. A personal loan is the most easy and common option available but has its own risks. With the spread of use of tractors in rural areas, loan against tractor, also called tractor refinance, is becoming an attractive and safe option to meet the farmer’s need. So, let us understand the meaning, eligibility and features of tractor refinance in the subsequent paragraphs.

What is Tractor Refinance?

Tractor refinance or loan against tractor is a type of agricultural loan wherein you need to mortgage your tractor to secure a loan. It is different from a new tractor loan or used tractor loan.

In a new tractor loan, you are taking a loan to purchase a new tractor and in a used tractor loan you are taking a loan to buy a pre-owned tractor.

However, in case of a tractor refinance, you are taking a loan after you have paid your earlier tractor loan fully and refinancing it by keeping your tractor as collateral/ security with banks or financial institutions (FIs), including NBFCs. While going for a tractor refinance you must ensure that either you have the original RC and your tractor is hypothecation-free.

What is Hypothecation?

Hypothecation is a financial practise wherein you pledge the ownership of your tractor with the FIs or banks until the tractor loan is paid completely. In this process, the hypothecation request with complete loan details is submitted to the regional transport office (RTO). As a result, despite the real ownership being with the banks or FIs, your name with address is mentioned in RC. It means that you will be legally liable for everything related to your tractor. Thus, hypothecation just provides the lender with the right to take custody of your tractor, if you default.

Therefore, you need to have paid your new tractor loan fully and get hypothecation removed from the RC book before applying for a tractor refinance. You can pay your loan completely either through paying the EMIs on time for the while loan tenor.

What Determines Tractor Valuation for Tractor Refinance?

Knowing the true value of your tractor enables you to get an idea about loan amount you will be sanctioned against your tractor. The essential condition for tractor valuation is a valid RC, which is not older than 15 years. If it is so, get it renewed.

Then, depending upon the brand of your tractor, model, model year and number of hours tractor has operated, the correct tractor value is arrived at.

Now, having arrived at correct value of your tractor, the Loan to Value (LTV) ratio will depend upon your CIBIL score (minimum 580+ and in general above 660), farm size, land holding, crop type, residence type – kuccha or pucca. An insurance of your tractor would be added advantage.

If everything is all right, then a loan amount of up to 75% of your used tractor value is sanctioned and disbursed.

Now, the question is, from where to calculate the value of your tractor? To know the correct and current value of your tractor, you can take the help of Tractor Valuation tool available at Tractorkarvan.

What are the Eligibility Criteria for Tractor Refinance?

• Age must be between 18 and 65 years* for agriculturist and between 21 and 65 years* for others.
• Must be actively employed and stable in employment for a minimum of 1 year.
• An original RC book, if hypothecation is not there. In case there is hypothecation, then NOC from previous lender.
• A minimum income of INR 1.20 lakhs per annum.

What are the Documents Needed for Tractor Refinance?

• KYC document: Any one government-issued to verify your identity, which include passport, aadhar card, PAN card, voter ID card, or driving license.
• A valid address proof: Any one can be provided, which include passport, electricity bill, or ration card, to verify your current residential address.
• Original RC book: To determine and verify your tractor ownership.
• Valid income proof: A valid asset proof in form of agricultural land ownership, or any other documents like bank statement/ passbook to support loan repayment.

What are the Features and Benefits of Tractor Refinance?

Loan against tractor comes with many features and benefits, if you are taking it from our lending partner TVS Credit. These include:

• Doorstep KYC verification: You can get your KYC verification from the comfort of your home as complete doorstep assistance is provided by our team.
• Flexible repayment options: The loan against tractor with customised repayment options. It could be as per the crop cycle or in monthly, quarterly or half-yearly EMIs. You can choose as per your convenience.
• Quick sanction and disbursal: You can get your loan against tractor approved and sanctioned in 24 hours. The credit to your bank account can take place within 48 hours.
• Competitive interest rates: Our interest rates are kept competitive. Be assured you will get relatively least expensive interest rate.
• Unlock your asset value: With tractor refinance, the biggest benefit is the unlocking the true value of your tractor asset, which you can use it meet your personal or business needs.

To sum up, tractor refinance is an attractive and safe option not only for farmers but also for banks. For farmers, it helps them overcome the liquidity crunch and gives them opportunity to invest in prospective farming needs. For lenders, it is devoid of any default risk.