The Ohio Democrat. (Logan, O. [Ohio]) 1886-1906, 1889-03-23
BUILDING SOCIETIES.
A Practical Treatise on the Methods OF
A niuAI


A Practical Treatise on the Methods OF
These Associations.
Each member for each share OF stock
of which he Is the owner pays to the
association n stipulated sum-weekly,
semi-monthly or monthly. Each men,
ber's contribution is small, but when
all are put together they make con-
siderable sum. This sum is immedi-
ately loaned to one or more Of the
members who can give the required
security, and becomes productive at
once. The borrower, thenceforth, pays
not only the dues above referred to
but, in addition, interest and premium
on the money borrowed. Should any
shareholder fail to make his regular
payments at the appointed time he is
fined such sum as makes promptitude
u profitable virtue.
The premium is one of the main
stays and at the same time one of the
dangers connected with the system.
When two or more persons desire a
loan at the same time and there is not
0npuBll III iii, IuSoNicii
arises as to who shall get it. This is
usually settled by an open auction, in
which each would-be borrower has the
same chance. The member bidding
the highest premium secures the loan.
1t will be readily seen that If the bor-
rover, in addition to the ordinary five
per cent, pays premium which makes
his loan cost him the equivalent OF
eight, ten, twelve or even a higher per
cent. per annum, he is apt to get dis
couraged and cease paying and leave
the property on the hands of the asso-
citation. And since these associations
can not live without borrowing mem
| bers, the whole affair will have to be
wound up.
Conservative associations discourage
high premiums preferring to make the
total cost of the loan about seven OF
eight per cent.
The question naturally arises: Where
is the benefit 10 the bureau in paying
seven or eight per cent. in a building
association when on good security he
can get money from a savings bank a
five per cent. A partial answer i:
this: In an association he is permit
ted to pay on account Of the principa
of his debt small sum-one dollar fol
each 5000 of debt-each month. III
fact the very month he borrows he be
gins to reduce his principal. Again
savings banks will loan only fifty pei
cent. of the value; these associa
tions can and do loan seventy-five
eighty, and even ninety per cent
of the value. This is safe under
this system because the principa
is constantly diminishing. Anothe
source of profit is fines for failures Il
pay promptly. This is a feature tina
may be. and in some instances, is yer.
much abused. The true function of
fine is to make neglect costly, but no
to make misfortune almost criminal
The idea underlying the whole system
is cooperation. Not combination O
part for benefit of that part, but all TO
the benefit of all. Good authoritie
place the range of fines at the rate o
from two and one-half per cent. L
twenty per cent. per month, the out
side figure being allowed only unde
exceptional conditions.
Still another source of profit arise
from Withdrawals; that is, member
leaving the association before tn
shares have reached their full value
Here again the practice is various
Some associations pay back all tn
principal paid in and all the profit
then lost with mental reservation
they pay principal and affixed per cent
of the profits. When the payments {
principal and the accumulation amoun
to the paid up value of the stock, the
this paid up value is given back to eac
member and that division of the assc
citation is closed up.-C. I. Southland
in N. Y. Star.