Many are installment-type loans, set up on equal regular payments to include interest and principal. This arrangement may be satisfactory for farmers with regular receipts, such as dairy farmers. However, farmers producing crops and meat animals find it more satisfactory to have loan repayment on a less regular basis, usually timed to the sale of crops and livestock. Budgeted loans, a form of line of credit, are increasing in agriculture. The lender and borrower determine in advance when loan funds will be needed and the timing for repayment.
Funds are then advanced as needed and repaid as products are sold.
This type of loan gives flexibility in managing cash flow, and the borrower pays only for the money actually used. The straight-end payment calls for regular payment of interest with the entire principal paid at the expiration of the loan. This method may allow you to carry a higher debt load, but it can also place you in an awkward situation when the loan expires. You must make provisions to have funds available for the principal when it comes due. Partial-payment loans require small, fixed principal payments each.