One of the most important parts of securing any sort of loan (but especially a farm land loan) is the rate of interest that will be charged along with it. In theory, most people would be able to pay off the principal of a loan with very little trouble. However, credit unions, banks and other lenders are businesses and need to make a profit. Hence the need for interest rates that help them bring in some additional money.
There are many kinds of rate models, but one of the best for any recipient of a loan is a fixed rate. A mortgage with a fixed rate will not change over time. For example, a loan of $60,000 that must be paid over the course of five years (or 60 months) would cost $1,000. A fixed interest rate of 2 percent per month would be an additional $20 each month.
Conversely, a variable rate will fluctuate over time. This means that while it could be lower on some months, it could also be higher during different times of the year. The variable rate may be tied to some obscure financial metric that loan recipients don't understand, which is why it is easy for banks and credit unions to push variable rates on customers. Ultimately, one of the most important considerations is that an interest rate should be low and fixed, even if there is a lower rate available that happens to be variable in nature.
