The true Democrat. [volume] (Bayou Sara [La.]) 1892-1928, 1914-06-27
FIVE RULES FOR BORROWING
MONEY.
News Letter:

farmers that there is no magic about
credit, are set down in Farmers Bulle-
tin 593, How to Use Farm Credit"
which the Department of Agriculture
has just published. Unless the farmer
who is thinking of borrowing money
fully understands these rules and is
willing to be guided by them, the Gov
ernment's advice to him is don't. AS
lit is, there are probably almost as
many farmers in this country who are
suffering from too much as from too
little credit.
Of these rules the three most impor.
tant 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 close relation to the
productive life of the improvement for
which the money is borrowed.
8. Provision should be made in long
time loans for the gradual reduction 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 diff
ference between folly and foresight,
extravaganza and thrift. If the money
is borrowed for wise purpose it will
produce enough to pay back principal
and interest and leave fair margin
of profit for the borrower into the bar
gain. If it is borrowed for a foolish
purpose it will produce nothing and
consequently 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 prin-
eiple: The loan must be repaid with
4 49, = 49,
the money 1t earns itself. For example,
if the money is used to buy machine
that will last 10 years, the machine
must earn enough in that time to pay
for itself or it never win. The loan,
therefore, should be entirely repaid
before the 10 years are up or the farm.
er will lose money on the transaction,
paying out interest for no benefit in
return. On the other hand, If too early
a date is set for repayment, the ma.
chine will not have had sufficient op-
portunity to make the requisite money
and the borrower may have difficulty
in raising it elsewhere. Rule pro-
vides for some form of amortization,
the system by which the principal is
repaid in installments so that the
amount of the loan is continually di.
minishing and in consequence the in.
terest charges also. Such a system is
quite feasible when the loan is really
productive, when it returns to the Dor.
rover definite revenue 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
to the serious consideration of every
one who contemplates borrowing
money. The bulletin also advises the
farmers to secure the lowest possible
interest. At first sight this seems toe
obvious to be worth mentioning. OF
course, the interest should be as small
as possible. Everybody knows that.
except the lender. But if the other