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Tractor Loan Vs Personal Loan For Your Farm

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3 Min Read

Agriculture is the primary source of livelihood for nearly 60% of the Indian population. When it comes to farm output, India ranks only second in the world, behind China. No doubt then, India is the biggest manufacturer and market for farm equipment such as tractors. The tractor industry in India is growing at a compounded annual growth rate (CAGR) of 8-10%.

Not only farming, but tractors can also be used for many other purposes such as clearing land, feeding livestock, and producing a harvest. When it comes to buying a tractor, there are many government-sponsored schemes and loans offered by banks and non-banking financial institutions to provide monetary aid to the farmers.

In this article, we’ve conducted a thorough comparison of the two most common loans available for the Indian farmer — tractor loan and personal loan. The information seeks to throw light on the features and benefits of both, and eventually help to choose a suitable financing option for buying costly farming equipment.

Let’s get started:

What is a tractor loan?

A tractor loan is a financing tool that is tailored to meet unique needs like buying a brand new tractor and related accessories. With a tractor loan – that can be taken out by an individual, a group of individuals, or an organisation — the borrower can get up to 90% financing of the total on-road price of the tractor.

What is a personal loan?

One of the most financial products offered by NBFCs, a personal loan can be used for a variety of purposes, including buying a car or tractor, procuring farm inventory, renovating a house, or purchasing farming land. Unlike a home or car loan, most personal loans are unsecured, meaning that the borrower doesn’t have to pledge collateral against it.

That is why these loans often carry a higher rate of interest. However, some NBFCs offer secured loans that entail more affordable interest rates. Importantly, a personal loan is one of the more versatile financing products in the market today.

Now, let’s compare the two types of loans basis specific parameters:

Tractor Loan vs Personal Loan

Loan amount

As mentioned above, a tractor loan can be used to avail financing up to 90% of the total cost of the tractor and its accessories. On the other hand, there is no fixed ceiling on the personal loan amount that an individual can avail at a time. It depends upon the credit history of the borrower. Usually, lenders offer personal loans of up to Rs. 50 lakhs (even more, in some instances).


In the case of tractor loan, it is the tractor that is considered as the collateral. When a farmer takes out a tractor loan to purchase a tractor, the vehicle becomes registered in the name of the farmer and hypothecated in the name of the financier.

On the other hand, personal loans are collateral-free loans. It means that if a farmer purchases a tractor using a personal loan, it will be registered in his/her name only without any hypothecation.

Interest rate

Since personal loans are collateral-free, they usually come with a higher interest rate as compared to a tractor loan. However, if the borrower shares a good relationship with the financier and boasts of a credit score of 750 or above, he would be able to avail such a loan at a relatively lower rate.

Eligibility criteria and disbursal process

Considering personal loans don’t require the borrower to pledge collateral, lenders usually follow stringent eligibility criteria for disbursal. On the other hand, the eligibility criteria for procuring a tractor loan are comparatively easy. All the borrower needs to do is provide his necessary KYC documents and furnish details of the tractor he intends to purchase.

That being said, a personal loan entails a more straightforward disbursal process, provided the borrower fulfills the eligibility criteria. With the help of personal loan apps, one can avail a personal loan within a couple of minutes.

The verdict

Now that you know the basic differences between the two types of loans, you are well-placed to opt for the one that’s best suited to your requirements. The primary benefits of a tractor loan are that it comes with a lower interest rate and easy eligibility criteria. However, a personal loan allows you to avail quick, hassle-free financing that can be used for a variety of purposes.

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