Ladysmith news-budget. [volume] (Ladysmith, Rusk County, Wis.) 1907-1927, 1914-07-10
FIVE RULES FOR
BORROWING MONEY

\ it." which the United States Depart
ment of Agriculture has just pub
lished. Unless the farmer who is
thinking of borrowing money fully
understands these rules and is will
ing to be guided by them, the Gov
ernment's advice to him is: don't
AS it is. there are probably almost
as many farmers in this country
who are suffering from too much ae
from too little credit.
Of these rules the three most i'm
portant are:
l. Make sure that the purpose for
which the borrowed money is to be
used will produce return greater
than needed to pay the debt.
2. The length Of time the debt is
to run should have a close relation
to the productive life of the improve
ment for which the money is Dor
roWed
3. Provision should be made in
long time loans for the gradual re-
ductiOn of the principal
The first rule is of course the key
to the wise use of credit. Between
borrowing money to spend on ones
self and borrowing money to buy
equipment of some sort with which
to make more money there is all the
difference between folly and fore
sight, extravaganza and thrift If
the money is borrowed for a wise
purpose it will produce enough to
pay back principal and interest and
leave a fair margin of profit for the
borrower into the bargain. If it is
borrowed for a foolish purpose it
will produce nothing and consequent
ly there will be nothing with which
to repay the loan. From this point
of view it matters comparatively
little whether the interest be high or
low. 1t is the repayment Of the prin-
cipal that is the chief difficulty.
Rules and deal with the most
satisfactory ways of repayment. I'm
derneath them both is the same
principles: The loan must be repaid
with the money it earns itself. For
example, if the money is used to buy
a machine that will last ten years,
the machine must earn enough in
that time to pay for itself or it
Wi
should be entirely repaid before the
ten years are up or the farmer will
lose money on the transaction, pay
ing out interest for no benefit in
return. On the other hand, if too
early a date is set for repayment,
the machine will not have had suf-
ficient opportunity to make the req
ulSlte money and the borrower may
have difficulty in raising it else
where. Rule provides for some form
of amortization, the system by which
the principal is repaid in Install
ments SO that the amount of the
loan is continually diminishing and
in consequence the interest charges
also. Such a system is quite feasible
when the loan is really productive,
when it returns to the borrower a
| definite revenue each year. Tables
| showing the payments required tC
pay off the principal and interest in
varying periods of time are append
ed to the bulletin and are recon-
mended to the serious consideration
Of everyone who cOntemplates Dor
rowing money. The bulletin also ad
ViseS the farmer to secure the low
est possible interest At first sight
this seems too obvious to be worth
mentioning. Of course the Interest
should be as small as possible
lender. But if the other rules are
observed, if the borrower manage!
his financial affairs soundly, he will
be surprised to find how much cas-
Ter it is to obtain favorable terms
The right kind of lender does no
want to foreclose mortgages; HI
wants his money back with a fai
profit, like any other merchant. Fo
money that is borrowed wisely, 70
money that is sure to be repaid, h,
charges low interest.
This in fact is why the govern
ment has published these rules TO
borrowers. II is not so much mat
ter of driving {, shrewd bargain as
is of observing few fundamenta
principles which alone can max
credit a blessing and not a curse
Wisconsin is getting more after