How To Get a Lower Interest Rate on a Land Loan

When you’re financing farmland, one of the biggest questions on your mind is likely: “What’s the interest rate on this loan?” And for good reason as real estate loans often span 10 to 30 years, so even small differences in rate can meaningfully impact your total cost over time. While interest rate shouldn’t be the only factor in your decision, it is a critical one.

The good news is there are practical ways to strengthen your loan request and potentially qualify for more favorable pricing. Below are six steps that can help you position your request well, plus a bonus option to keep in mind after closing.

Strengthen your credit profile.

Lenders review your credit history and overall credit profile when setting loan terms. In general, a stronger credit score and a clean payment history signal lower risk, which can support better pricing. If you’re working to improve your score, focus on the basics: pay all bills on time, pay down revolving debt, and avoid unnecessary new credit inquiries before applying.

From Alabama Ag Credit’s perspective: credit matters, but it’s not the whole story. We’re a capacity‑focused lender, which means we also look closely at your ability to repay based on the strength of your operation.  We are also proven experts who can bring meaningful value to your operation and support you as you grow, offering insight and flexible financing terms tailored to the needs of your operation no matter its size.

Provide a clear plan for the land.

A land purchase is a long‑term investment, and a clear plan helps a lender understand how the property fits into your operation and supports long‑term growth. A strong plan typically outlines your goals for the property, your operating experience, income expectations and expense assumptions, how the land will contribute to cash flow over time, and your risk‑management strategies for markets, weather, and input costs. When you can clearly explain both the “why” and the “how,” you build confidence in your request.

Consider a larger down payment.

A larger down payment reduces the lender’s risk and demonstrates a strong financial commitment to the purchase. It can also improve the loan‑to‑value ratio, which may support more favorable terms. For many land purchases, putting 15 to 35 percent down is common; however, the right amount varies based on the property, borrower profile, and overall strength of the request. If you have flexibility, increasing your down payment is one of the most direct ways to strengthen the structure of the loan.

Choose a term that supports both growth and stability.

Land loans often range from 5 to 30 years. In many cases, shorter terms come with lower interest rates because the lender’s risk decreases over a shorter repayment period. A 20‑year fixed‑rate loan is one of the most common structures, offering a balance of competitive pricing, predictable payments, and long‑term planning stability. The right term ultimately depends on your operation, your cash flow, and your long‑range goals. The key is selecting a structure that supports healthy growth without stretching repayment too thin.

Demonstrate strong repayment capacity

Because Alabama Ag Credit places a strong emphasis on capacity, anything that demonstrates repayment strength can help your overall request. This may include reliable farm or timber income, strong liquidity and working capital, additional collateral such as other land or equipment, and a proven track record of consistent performance. In plain terms, lenders want to see that your operation can handle the payment even if conditions change. What we look at is straightforward: cash flow and accrual performance matter. If your financials show the ability to generate earnings and manage obligations, it strengthens your position.

Work with an ag lender who understands rural borrowers.

Ag financing isn’t one‑size‑fits‑all. Land values, production cycles, and income timing look different across rural America, and the best loan structures reflect those realities. At Alabama Ag Credit, we work with farmers, landowners, and rural families every day. Our goal is to help you build a land financing plan that fits your operation, supports long‑term growth, and provides stability through changing markets.

Qualifying for a lower rate often comes down to presenting a strong overall request—your credit profile, equity position, loan term, collateral strength, and most importantly, repayment capacity. When these pieces work together, you’re in the best position to benefit from improved pricing.

If you’re considering a farmland purchase or evaluating how to structure your next land investment, Alabama Ag Credit is here to help. Reach out anytime to talk through your goals and explore land loan options tailored to your operation.