Borrowing
Fees & Charges
Repayments
Interest Rates
Security
Applications
Borrowing
Why choose Rural Finance?
As Victoria's own specialist rural lender, Rural Finance has been serving farmers for over 50 years and provides a range of flexible loan packages and services to meet the unique needs of each farming enterprise and rural industry.
Understanding the risks and vagaries associated with farming is important to Rural Finance, and hence an understanding attitude is adopted when clients go through difficult times. Flexibility is built into repayment options, so loans may be tailored to suit the income pattern of the individual enterprise.
With personal service a high priority, local lending officers do on-farm visits to really understand each enterprise and discuss the financial options available, with a view to developing strong long-term relationships with clients.
How do I work out my borrowing limit?
The starting point when evaluating your borrowing needs, is to know your current financial situation with respect to:
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Assests and liabilities |
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Historic and projected cash flows including peak debt and annual cash surplus/deficit; |
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Projected historic profit and loss; and |
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A S.W.O.T. analysis of the business (Strengths, Weaknesses, Opportunities, Threats) |
Funds can be safely borrowed so long as the debt can be serviced after allowing a margin for risk.
How long should the term of my loan be?
The strength of your cash flow will help determine the length of the loan. Rural Finance offers loans up to 25 years. Interest only loans can also be arranged.
Is there an age limit of the borrower?
Rural Finance can consider applications from Victorian farmers over the age of 18 who can demonstrate they have the ability to service and secure the debt.
Fees & Charges
What fees does Rural Finance charge?
The only fee is the loan establishment fee. There are no ongoing fees for the term of your loan - no line fees, no property valuation fees and no account maintenance fees.
Unlike many lenders Rural Finance doesn't charge a fee for managing an account.
What costs may be associated with refinancing a loan from another lender?
You should consider charges that may be imposed by the existing lender. These could include early repayment fees, penalty interest particularly if you have fixed rate loans as well as discharge of mortgage fees.
Repayments
Can I make extra repayments?
Rural Finance has loans with the flexibility to accept additional payments and a product that allows you to redraw additional funds provided you are ahead of your scheduled repayments.
What happens to my payments if a drought occurs in my district?
In all instances it is best to get in contact with your lender to discuss your financial position if you anticipate difficulties in meeting your payments. Rural Finance understands the cyclical nature of farming and will help you find ways to manage through difficult periods. We may consider placing your loans on interest only for a time, or rescheduling repayments or providing additional working capital if it is prudent to do so.
How do I make payments?
Rural Finance will send you a reminder statement a few weeks before an instalment is due and there are several different ways of making loan repayments:
The online banking facility allows clients to transfer funds online by drawing down on their loan and transferring money to nominated accounts.
Another repayment method is AutoPay which is an automatic payment system that enables you to have funds automatically transferred from your cheque/savings account to meet Rural Finance loan repayments when they fall due.
Clients can also pay accounts:
(i) over the telephone
(ii) via the internet using BPAY™.
(iii) by cheque in the return mail
(iv) in person at any Regional Office.
Interest Rates
What is the difference between fixed and variable interest rates?
A fixed interest rate allows you to have certainty over the payments you will make/receive on your loan/deposit balance over the fixed rate period.
A variable rate changes over time depending on a range of factors effecting interest rate markets.
A variable rate is often lower than a fixed rate at the time of settling your loan because you are taking on the risk of interest rates moving. If you lock in a fixed rate, then the risk of movements in interest rates is borne by the lender.
What is the difference between nominal and effective interest rates?
The rates you commonly see quoted as a rate per annum (p.a.) is called the nominal rate (unless otherwise specified). This rate is used to calculate the interest payable/receivable on your loan/deposit balance.
To calculate your interest payable over any particular period you simply divide the nominal rate (p.a) by the frequency of interest charging eg. 12 for monthly, 4 for quarterly, 2 for bi-annual and most commonly 365 for daily, and then multiply this by the account balance. When interest is calculated daily, this calculation looks likes this:
(i / 365) x n x balance
Where: i = the nominal interest rate
n = the number of days over which the balance is held
So to calculate the interest for a single day, assuming a nominal interest rate of 6.00%p.a and a balance of account at the end of the day of $100,000 the result is:
(0.06/365) x 1 X 100,000 = $16.44
If the account balance does not change for a period of 30 days the calculation is:
$16.44 x 30 = $493.20
An effective rate takes into account the effect of compounding interest over a particular period. So while the interest you pay/receive is calculated using the nominal rate above, the effective rate takes into account the effect of compounding that interest over a specific period.
For example if interest is charged monthly, and the nominal rate is 6.00%, then the effective rate is calculated using the following formula:
Effective rate = (1 + i/p)^p - 1
Where: i = the nominal interest rate
p = the number of compounding periods
Effective rate = (1 + .06/12)^12 - 1
= (1.005)^12 - 1
= 1.0617 - 1
= .0617 or 6.17%
So if you didn't pay interest for a whole year, and let the interest compound each month the total interest payable over the year would equal the effective rate x the balance at the start of the year. In our example:
$100,000 x 6.17% = $6,170
If interest is paid through the year and not compounded, then the amount of interest paid in the year will equal the nominal rate x the balance at the start of the year.
What are Rural Finance's Interest Rates?
Rural Finance has a wide range of lending products with different interest rates and loan terms. Each application is valued on its merits and our lending staff design a lending package to suit your individual requirements and cashflow.
Rural Finance's interest rates are monitored regularly so that we continue to offer tailored products in keeping with the latest market trends.
Our current interest rates can be obtained by enquiry through any Rural Finance office.
Security
How much security do you need to offer?
This is negotiable and varies depending on individual circumstances.
What types of security does Rural Finance accept?
Again it varies between individuals. The purpose and terms of each loan determines the security requirements.
If I have reduced my loan can I ask to have part of the security released?
Yes, provided there is adequate security remaining.
Applications
How do I apply for a loan?
All new and existing clients are encouraged to contact their nearest Rural Finance office to arrange an on-farm visit to discuss their borrowing requirements.
What do I need to supply to Rural Finance to support my application?
Rural Finance requires a list of your assets and liabilities, copy of your financial statements for the previous 3 years, and projected income and expenditure for the year ahead. A farm visit will then be arranged at a mutually convenient time.
Can I apply for a loan if I have off-farm income?
Yes we would need to consider the nature of employment and the degree to which it would be supporting the farming operation.
