Tractors are expensive machinery; therefore, many farmers look for loans to buy one. With a tractor loan, the farmer pays only a part of the price as a down payment, and the bank pays the rest. The farmer then returns this money to the bank slowly, every month, in small fixed amounts. However, these monthly payments have interest rates that might increase the overall amount you pay to buy a tractor.
That is why understanding the tractor loan interest rate is important. This blog will explain what the tractor loan interest rate is, which bank offers the lowest interest rate, and how you can calculate your loan EMI:
What is the Tractor Loan Interest Rate?
The tractor loan interest rate is the extra charge that the bank adds when it gives a loan to buy a new or used tractor. This charge is shown as a percentage (%) of the loan amount per year. The interest rate decides how much more the farmer will pay to the bank in addition to the loan amount. Selecting a tractor loan with the lowest possible interest rate saves money over the loan tenure, making farming investments more affordable. It’s essential for farmers to compare different lenders’ offerings, factor in processing fees, repayment options, and prepayment charges before finalizing a loan.
Farmers also benefit from flexible repayment terms, usually ranging from 1 to 7 years, to suit their financial capacity and crop cycles. Some banks may provide loans without collateral, while others might require land or tractor assets as security.
These interest rates can vary based on several factors, including the lending bank’s policies, the type of tractor (new or used), the borrower’s creditworthiness or credit score, loan amount, and repayment tenure. For example, major banks in India like SBI, HDFC, Bank of Baroda, Punjab National Bank, Kotak Mahindra, and Mahindra Finance offer tractor loans with interest rates ranging roughly between 8% to 14% per annum. Generally, loans for new tractors tend to have slightly lower interest rates compared to those for used tractors, as the risk associated with new tractor loans is considered lower by lenders. Farmers also benefit from flexible repayment terms, usually ranging from 1 to 7 years, to suit their financial capacity and crop cycles. Additional factors like timely repayment history, insurance coverage, and existing financial relationships with the bank can influence the interest rate offered.
Simple Example of Tractor Loan and Interest Rate
Imagine a farmer takes a tractor loan of ₹4,00,000 at an interest rate of 12% per year for five years. Then the farmer will not just return the ₹4,00,000 that they borrowed. They will also pay about ₹1,30,000 extra as interest. This means that at the end of five years, the farmer will pay the bank a total of ₹5,30,000.
How Banks Decide the Interest Rate?
Banks and lenders do not give the same rate to everyone. Most banks offer interest rates based on the following criteria:
- Credit history: If you have paid past loans on time, you may get a lower rate.
- Income source: Regular farm or business income makes you a safe borrower.
- Type of tractor: New tractors may get better interest rates than used ones.
- Loan tenure: A shorter loan period can sometimes mean lower interest.
- Collateral: Providing collateral generally suggests lower interest rates.
What Are The Interest Rates in 2025?
Here is the detailed breakdown of tractor loan interest rates offered by major banks in 2025:
State Bank of India (SBI)
SBI offers the lowest interest rates on tractor loans at 11% p.a. onwards. The bank provides loans for both new and existing farmers with optional collateral security requirements. It offers loans starting from Rs. 2 lakh and going up to Rs. 25 lakh, with a processing fee of 0.50%.
Eligibility:
- Minimum 2 acres of land
- A credit score of a minimum of 650
HDFC Bank
HDFC Bank covers 90% of the tractor cost with its loans at competitive rates. The interest rate varies with eligibility, down payment, and mode. The bank offers quick loan disbursement with 30-minute approval and processing fees of 2%.
Eligibility:
- Income: Rs. 1 lakh for farmers, Rs. 1.5 lakh for the commercial segment
- Age of the Borrower: 18 years to 60 years
Axis Bank
Axis Bank also covers 90% of the tractor cost. On new tractor loans, it charges between 17.50% to 20% p.a., and on used tractors, the interest rate is slightly higher at 18% to 24% p.a. In addition, the bank charges up to 2% on new tractors and 2.5% on used tractors, plus GST on the loan amount as processing fees.
Eligibility:
- Minimum 3 acres of land
- Age of the Borrower: 18 years to 75 years
Bank of Baroda
Bank of Baroda offers tractor loan interest rates at 12.25% to 14.40% p.a. for agricultural use and 12.25% p.a. onwards for commercial tractors. Furthermore, it provides low processing fees at only 1% of the loan amount, which makes it stand out.
Eligibility:
- Land Requirement: Minimum landholding up to 2.5 acres (single or jointly owned) for both agricultural and commercial tractors.
- Age of the Borrower: 18 years to 70 years
Tractor Loan EMI Calculator
EMI means Equated Monthly Instalment. It is a fixed amount to pay every month to the bank until the loan is finished. EMI includes both the loan amount and the interest.
Why Use a Tractor Loan EMI Calculator?
A tractor loan EMI calculator is an online tool that uses three things:
- Loan amount
- Interest rate
- Loan period
The calculator will instantly show the monthly EMI and the total interest the farmer needs to pay. The EMI calculator helps farmers see which loan is cheaper and easier to repay.
The following is the list of trusted tractor loan EMI calculator providers:
- HDFC Bank
- Mahindra Finance
- John Deere India
- Tractor Junction
- L&T Finance
Conclusion
The tractor loan interest rate is the most important factor when taking a loan for your tractor. In 2025, SBI offers one of the lowest starting rates at around 11%, while HDFC and Bank of Baroda are in the mid-range, and Axis Bank charges higher rates.
Before choosing a loan, every farmer should use a tractor loan EMI calculator. By comparing banks and understanding EMIs, farmers can save thousands of rupees and make their tractor purchase stress-free.