The Grange advance. [volume] (Red Wing, Minn.) 1873-1877, 1877-05-02

Mutual Loans Associations.

Mutual Loans Associations.
We have sought in VAIN for some re-
liable data as to the amount paid an
nual]y by the people Of this State to
Eastern and foreign capitalists as in
terest on loans, but are unable TO get
even an approximate estimate: The
sum IS certainly a very large one, and
whatever will tend to diminish it should
be gladly availed oI by every citizen Of
the State. Some Eve years aga, we pub
ished what We then regarded as an
available plai. to afford relief from this
expense. The article was mainly a
translation from an editorial published
in q German newspaper, describing the
organization Of "pcasaats' banks or
loaning associations in that country,
and the principle upon which they We're
based was precisely that on which the
building associations Of this country are
founded.
Let a company be organized with,
say, u nominal capital stock Of 500, 900,
divided into 1900 shares of $50. Let
it be obligatory upon the subscribers to
pay upon these shares one-half Of one
per cent. Or 25 cents per share PEI
month, with Is cents per share ini.ia.
ton fee at the commencement Of the as.
sociation, and cents per shace per
month in all cases Of failure to pay the
installments promptly. This Initiation
fee will give the sum Of $500 for all the
shares and it may be reasonably esti-
mated that $40 per month will be real
lied from fines. This will about meet
all the necessary expenses Of the society
for the first year, if properly conducted.
Now, if all the shares are taken, there
will be paid into the society the first
month $500, and, each subsequent
month (not counting fines) $500. This
Will "sSAoS"Uo '2O,oo0 ao VIC pay 1AeAtS
made the first year. Now, the plan
contemplates the loaning of the amount
on hand each month to a member Of the
society, and the usual method pursued
is for the secretary to announce, at the
monthly meeting, that there is such an
amount to loan and call for bids. The
amount bid is called. the premium.
Suppose that we are at the first meeting
and the Secretary announces that he
has $720 to loan (the $50 being reserved
for expenses,) in sums Of $50 or
more as those bidding may desire.
A wants it and bids 25 per
cent. premium. B. bid!s 1873 per
cent, G.. bids 40 per cent, and being
the highest bidder gets it. Now, it is
not 40 per cent. on 1920 that he bids,
but he agrees to take an amount 10 per
cent. less than his nominal loan. In
this instance, he must nominally borrow
$1,000, as that sum, less 40 per cent.
of itself, leaves 500. He gives security
for and pay, interest at 6 per cent. upon
the nominal amount, however, and holds
stock equal to that sum. His annual
interest will, therefore, amount to $72,
or 10 per cent. upon the amount he
really bOrrows. This makes his month";
ly interest payments Sc. and his month
ly payments on stock $6-total $40
per month, or $l44 per year.
But we must remember that these
payments 90 into the ]oaning fund of
the association and Immediately begin
working for him as well as for other
stockholders.
The second month the association
will have for loaning $506, (C.'s inter-
est being counted in.) At the same rate
this will give $4.22 per month interest,
and at the third meeting the loan fund
will amount to $510-22. If the whole
amount is loaned every month, at the
same rate, at the close of the year the
loans will aggregate $6,520.1S and the
second year will commence with the
amount Of $553.66 to loan. It is not
worth while to follow out the calculation,
for the rapid increase will be appreciat.