Mercer County, Ohio on the Indiana line | How can a person earn money on borrowed money?
Does it make sense to put most of my available cash into long term loan and take out a revolving loan for crop expenses if the revolving loan has cheaper interest? Or even slightly higher interest rates?
I'm currently in my first year on a 10 year note at 3.99%.
Could I secure an operating note to continue getting early pay discounts, while also driving the principal down on my 10 year note, and still be money ahead?
What happens if my revolving loan starts at 3.5% then jumps to 6% by year 4? If I can't crawl back out from under that revolving loan and get stuck paying 6% how much of what I gained will I lose?
I guess what I don't understand is; how many cents per dollar borrowed will my revolving loan cost me by the time I sell my corn in July 2017 after paying for seed in October 2015? Figuring how much I'd save on my long term loan is easy.
When I add my Chemical costs in December and fertilizer costs in February, 1/2 rent in April, fuel all season, and 1/2 rent in September how much interest would I pay per dollar spent when I sell my crop in July the following year? Obviously the earlier I spend on my inputs the more it'll cost me in interest but I can't put heads or tails to how much interest I'll end up spending total.
Can anyone make sense of that?
No one in my immediate family has any experience working with operating loans, but I have a good friend that has had one since he was 16. |
How to make money by paying interest on an operating loan?
