Knoxville daily chronicle. [volume] (Knoxville, Tenn.) 1870-1882, 1872-01-21
HOW BUILDING AND LOAN ASSOCIATIONS
ARE OPERATED


We have received copy of the consti-
tuition, bylaws and charter of building
and loan association in Pennsylvania
which we have examined with some care
As the subject of such an organization
IS just now engaging the attention of q
number of our citizens, we propose to give
brief outline of its general features
The object Of such an association is the
mutual benefit Of the cOrpOrators as MEM
bers of a mutual saving fund society by
the accumulation Of fund by weekly pay
ments of dues and interest and from other
receipts sufficient TO loan to each and ev-
cry member wanting money, or loan a
specified sum at a specified interest. The
sum generally fixed upon is two hundred
dollars, loaned out ON bidding, at the
highest premium provided it is not less
than ten per cent, and the premium to
be deducted out Of the loan, when advanced.
Let us give practical illustration of the
workings of such an association. Suppose
one hundred mechanics organize into such
body, each taking two shares of stock.
They begin by electing officers, a Presi-
dent, Secretary, Treasurer and ten Direc-
tors. Each member pays an initiation fee
of say fifty cents on each share, which
would give fund of one hundred dollars
to begin with. They next agree to pay on
each share monthly due Of one dollar a
monthly due of one dollar, which would
give them from this source a monthly rev.
enue Of two hundred dollars. For failure
to attend meetings or pay dues, small fines
are assessed. On the basis above given, at
the end of the first month the association
has three hundred dollars, enough to begin
a loan. Suppose the loans are fixed at two
hundred dollars. q The association puts up
this sum to loan to the highest bidder for
one year on security, to be approved by the
board of directors. 1t is bid off say at ten
per cent. The borrower pays his premium
in advance and gets the nett proceeds, one
hundred and eighty dollars, for which
he gives his mortgage or other security.
The balance on hand is loaned until the
end Of the second month, when the second
monthly dues collected gives the associa-
ton a fund Of three hundred and twenty
dollars, or perhaps by new additions
enough to make four hundred two addition
al loans. These loans are again bid of, the
premium deducted and added to the fund
accommodating for the the third month. We
have given enough now to seethe theoryof
these mutual saving funds. If we eX-
anime it we see the tax to each member is
small. He begins by paying one dollar, or
more, according to the number of shares
he wishes to take. The burden upon him
is light, he does not feel it, and yet at the
end of year, by a tax of twenty-five dol
lars which he pays out in driblets, he finds
himself the owner of valuable stock, GER
tain to appreciate every year, until the
premiums will swell to a fund to be di-
vided and certain to amount to more than
his loan, for which he has given security.
The interest is high, it is said, yes but
the borrower is paying it to himself. He
Tets hisshare of the premium paid on every
loan, and the higher it is bid off the better
for him. Ifhe can not afford to PAY the
highest per cent. he can wait until those
most in need get their loans when he can
be Accommodated. The protection against
failures and dishonesty is by care in the
admission of members and by the selec-
ton of good officers who will see that the
loans are amply secured. These officers
are paid little for their troubles, and
must be stockholders. Guard against COM
binations by limiting the number ofshares
each member can take to five or ten,
Each one will govern himself in taking
shares by the amount he can afford to pay
each month in dues.
These associations are numerous in some
of the States, and SO far as we know, have