Daily globe. [volume] (St. Paul, Minn.) 1878-1884, 1883-01-27

| ASSOCIATION Is inc DeSI IOdu 4OI AAAl w
make. The principle of paying by a
monthly sinking fund, portion OF the
main debt as well as the interest, is sound
financially. 1t is the principle adopted by
all municipal, state, and national govern
men aho levy tax every year as sink
ing fsud to pay the principal OF their ma
turing bends.
This calculation is based on what is
termed the gross plan-where you pay 6
per cent. interest on the gross sum, and
deduct the bonus in advance.
THE nsTALLMENT PLAN
is another plan adopted by number of
ST. Paul associations-where the whole
sum borrowed is paid to the
borrower and instead of deduoting the
bonus, it is added TO the monthly install
ments OF Gdes and paid with the interest
and principal It amounts to the same
thing III the end-the borrower paying
about $50 or over per month for each
| s., 900 net cash received. In both cases
TIE BORROWER PARTICIPATES in TEE PROFITS,
and these profits cut down his bonus to &
merely nominal sum and make his loan q
profitable transaction instead of ruinous
one, as it would be were he to pay such a
bonus without sharing IN the profits. And
here is just the falIacy. Here is the mis-
take the unbelieying outsider makes, who
knows so much more than his neighbors.
He says the man who don't borrow makes
the money, whereas one makes precisely
as much as the other-only the borrower
has his credited on his loan. and the non
borrower draws his in cash in nine years.
The borrower realizes on his stock at once,
has it discounted, so to speak, and uses its
proceeds to build house and save rents
He gets the use of it nine years, while the
n-borrower lies out of it nine years, and
whether the one makes more than the other
depends entirely upon the sagacity and
wisdom with which the borrower handles
his money during the nine years, as in the
case of every loan.
HOW BUILDING ASSOCIATION LOAN MAY COST
ONLY FROM / TO PEE CENT. PER YEAR.
In the instance above given, we have
figured on loan made the very first meet
ing, and where the full 108 months inter
est is paid, and we have shown that in this
extreme case it is preferable to an per
cent. loan,
Now a loan need not be made the first
meeting, nor the first year, nor the second,
third nor fourth year., The member makes
it when he pleases.
It is plain to see that if he does not make
it for four and q half years, he only pays
half the time the man pays who makes 1t
the first meeting-and hence only about
half the interest-if time was the only ele
ment to characterize the transaction. But
besides this rebate of one-eighth, one
ninth or one-tenth from the bonus is made,
varying in different associations, for each
year the member has paid before he Dor
rows. So thai if a member borrows after
four years, four-eighths deducted from his
bonus makes it one-half OFF, or $50 offeach
5000 instead of $40. He receives $165 net
instead of $3.50, and if he has five shares,
he receives 1926 instead of $3.50. He pays
out instead of 1880 for a loan of $3.50,
$40 for a loan OF S825-that is $240 in
four years at So per month, before he bor
rows, and 5000 in the remaining FIVE years,
at so per month, after borrowing. His
interest here is almost nominal. After
five, six or seven years it is
either actually nominal or his
profits exceed both bonus and interest,
and make his loan almost equal to cash
ing of his stock at par without interest.
It is plain to see, then, that
to get the most out of
ones stock on loan, it is
a great advantage to be able to take stock
as long before you wish to borrow as pos
sible; let it pass through the blossom and
bud period, and ripen into maturity as far
as possible before it is plucked. Its juices
will be sweeter and its flavor richer as a
loan which excels all others in its profta-
bleness to the borrower.
SAFETY AND PROFIT AS SAVINGS BANKS.
The Building association is the only saw
ings bank which secures all its depositors
with real estate security.
llfunds and deposits are loaned the
very night they are deposited,an in few
days the association holds bonds and mort
cages to secure them on valuations (gener-
ally double the loan) approved by the di-
rectors and titles approved by the attor-
ney. A part of the principal being paid
every month, the security is getting better
every month pro rata. A failure is almost
an impossibility without the grossest neg
ligence of the officers. If dishonest secre-
tary or other Officer should embezzle
few thousand dollars or loss should oc-
cur from insufficient security one or two
months additional payments would be the
only damages. No large salaries are paid
and no outside investments are made. How
they have succeeded and vindlcated
HOW THEY HAVE SUCCEEDED AND INDICATED
THEIR USEFULNESS AND sOCNDNEss IN
OTHER PLACES.
Authorities might be quoted at length to
show that these associations have existed
for about half a century in England,
France, and Germany and for over thirty
years in Pennsylvania, Maryland, and Della
ware, and have been successful. A recent
English pamphlet by T. Y. Strachan, Fellow
of the Institute of Actuaries of Great Brit
ain and Ireland, and of the Statistical So
ciety of London, says: "a very large
amount of confidence is reposed in these
institutions. They are increasing and
spreading in every town. 1t is found to
be more advantageous to pay the principal
with the interest by monthly installments
than only to pay interest half yearly and
leave the debt untouched"
As to borrowers, he says: Borrowers in
building societies are often content to pay
high rate of interest, because in the di-
vision of profits they get part of it back
again"
Arthur Scratchley an English author of