The diamond drill. (Crystal Falls, Iron County, Mich.) 1887-1996, 1914-06-20
Rules For Borrowing Money
Washington, ID. e. A.,

farmers that there is no magic about
credit are set down in Farmers
Bulletin 593 "How 10 Use Farm
Credit, which the United States De-
partment of Agriculture has lust pub.
iished. Unless the farmer who Is
thinking of borrowing money fully un.
derstands these rules and is willing TO
be guided by them. the Government
advice to him is don { AS il is,
there are probably almost as many
farmers in this county who are suffer
ing from too much as 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 10 be
used will produce return greater
than needed TO paw the debt.
2. The length of time the debt is
to run should have close relation to
The productive life of the improvement
for which the money Is borrowed.
3. Provision should be made in
long time loans for the gradual reduc-
ton of the principal.
The first rule is of course the key to
the wise useful credit Between Dor
rowing money to spend on ones self
and borrowing money TO buy equip
ment Ut some sort with which to make
more money there is all the difference
between folly and foresight, extrava-
gance and thrift III the money Is
borrowed for wise purpose it will
produce enough to pay back principal
and interest and leave tair margin
of profit for the borrower into the
bargain. If it is borrowed Tor a fool.
ish purpose It will produce nothing
and consequently there will be moth,
ing with which TO repay the loan.
From this point of view it matters
comparatively little whether the in
terest be high or low. II is the repay.
ment of the principal that's the chief
difficulty.
Rules 2 and 3 deal with the most
satisfactory ways of repayment. I'm
derneath them both is the same prin-
ciple: The loan must be repaid with
the money it earns itself For exam
pie. if the money is used TO buy a
machine that will last ten years. the
machine pust earn enough in that
time TO pay for itself or il never will.
The loan therefore. should be entirely
repaid before the ten years are up or
the farmer will lose money on the
transaction, paying out interest for
no benefit in return. On the other
hand, il too early date is set for re.
payment, the machine will not have
had sufficient opportunity TO make the
requisite money and the borrower may
have difficulty in raisiL il elsewhere
Rule 8 provides tor some form of
amortization, the system by which
the principal is repaid in instalments
so that, the amount of the loan is con
tinually diminishing and in conse.
quence the interest charges also. Such
system is quite feasible when the
loan is really productive, when ii re.
turns TO the borrower definite re-
venue each year. Tables showing the
payments required to pay off principal
and interest in varying periods of
time are appended to the bulletin and
are recommended 10 the serious con-
sideratIon OF everyone who contem
/ plates borrowing money. The bulletin
also advises the farmer TO secure the
lowest possible interest. AT first
sight this seems too obvious 10 be worth
mentioning. OF course the interest
should be small as possible Every
body knows that-excep5 the lender.
1 But ii the other rules are observed, it
the borrower manages his financial
affairs soundly, he will be surprised to
| find how much easier il is 10 obtain
favorable terms. The right kind of
lender does not want 10 foreclose mort
cages; ne wants his money back with
fair profit, like any other merchant
For money that is borrowed wisely,
for money that is sure 90 be repaid, he
charges low interest
This in tact is why the government
has published these rules tor borrow
ers Ii is not SO much matter of
driving a shrewd bargain as 1t is of