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What is Rural Credit?

Some lenders who provide rural credit specialize in farm loans.
In some cases, local cooperatives loan money to rural family farmers, who then owe money until their current cycle of crops are sold.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 23 November 2014
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Rural credit is any type of lending program or line of credit that is aimed at impacting a rural population in some manner. There are banks and cooperatives that specialize in extending this type of credit to farmers and others engaged in the agricultural task. Depending on the nature of the organization, credit plans may focus on providing mortgage assistance, securing new equipment, or even funds to support research into various aspects of land development within a rural community.

Individuals have access to rural credit options under certain circumstances. For example, novice farmers and ranchers may be granted a loan or line of credit to manage the acquisition and upgrade of an existing farm operation, or the establishment of a new one. Farmers and ranchers are sometimes extended credit of this type when some sort of natural disaster has ruined crops and threatens the ongoing operation of the ranch or farm. Some lenders specialize in farm loans that offer highly competitive fixed and variable mortgage rates which make it possible to refinance a farming operation for the purpose of acquiring new machinery or meet some other pressing need relevant to the operation.

Businesses can also secure rural credit under specific situations. This includes the acquisition or establishment of a commercial farming operation, or a commercial ranch. A business may also obtain funds earmarked for development, assuming that the project concerned will benefit the rural community where it is based.

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In many countries, rural credit is extended under the auspices of national government programs. Often, these programs are focused on enhancing the agricultural effort within the country as a means of bolstering the economy. With government sponsorship, farmers and ranchers can often obtain resources that make it possible to sustain their productivity through growing seasons, then repay the loans once livestock and crops are sold. It is not unusual for rural credit of this type to be extended as a means of keeping a balance between imports and exports, by assuring that a certain percentage of crops and other rural products are produced domestically.

Along with government funded programs, rural credit is sometimes obtained from organizations that are founded by and for farmers, ranchers, and dairy operators. Local cooperatives often provide much-needed credit to farmers and others, allowing them to receive what they need to operate their farms, effectively running a tab until the current round of crops are sold. Banks created to assist rural communities will often underwrite loans that can be used for everything from building improvements to purchasing large quantities of seeds or other elements required to produce a substantial crop. As with any type of credit option, anyone who wishes to obtain rural credit must meet the basic criteria of the lender, and demonstrate a reasonable ability to repay the amount of the loan or the funds borrowed on a line of credit.

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Markerrag
Post 3

@Vincenzo -- And there are some people who say that the Rural Development program saved real estate markets in their areas during tough times. Isn't it worth stretching the definition of "rural" if it keeps homes moving and economies growing?

Vincenzo
Post 2

@Melonlity -- The Rural Development program has come under fire because some say the definition of rural has been stretched to include areas that are suburban. If you have a town that has 25,000 people, is that rural? If so, why can people still get home loans?

I am not saying the Rural Development program is bad, but it should be used in rural areas only.

Melonlity
Post 1

Good job on mentioning rural mortgage loans. Those Rural Development loans are guaranteed by the federal government and are one of the few truly "zero down" mortgages left in the country.

And they help build rural communities, too. That's what we call a bonus. That is a great program, indeed, and we are lucky to have it as it has truly helped a lot of areas grow.

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