Macon beacon. [volume] (Macon, Miss.) 1859-1995, 1914-07-03
Rules For Borrowing Money.

Inc 1OlIUWlIiR NCLf pCA IihShI
article has been issued by the
Agricultural Department at
Washington and should be read
with interest and profit by every
fam and business man in the
county:
Five rules designed to convince
farmers that there Is no magic
about credit are set down in
Farmers Bulletin 593, "How to
Use Farm Credit" which the
United States Department of
Agriculture has just published.
Unless the farmer, who is think
ing of borrowing money fully
understands these rules and is
willing to be guided by them, the
governments advice to him is:
DON'T. AS it is, there are prob
ably almost as many farmers in
this country who are suffering
from too much as from too little
credit.
Of these rules the three most
important are:
I. Make sure that the pur-
pose FIR which the borrowed
money is to be used will produce
a return greater than needed to
pay the debt.
3. 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 longtime loans for the grad
ual 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 borrow.
ing money to buy equipment OF
some sort with which to make
more money there is all the diff
ference between folly and fore
sight, extrayagace and thrift. II
the money is borrowed for a wise
purpose it will produce enough
to pay b ok principal and inter-
est and leave a fair margin OF
prohted for the borrower into
the bargain. II it is borrowed
for a foolish purpose it will pro-
duce nothing and consequently
there will be nothing with which
to repay the loan. From this
point of view it matters compar-
atively little whether the inter
est be high or low. 1t is the re-
payment of the principal that is
the chief difficulty.
Rules 2 and 8 deal with the
most satisfactory ways of repay
ment. Underneath them both is
the same principle: The loan
must be repaid with the money
itsearns itself. For example, il
the money is used to buy a ma
chine that will last ten years, the
machine must 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 farm
er will lose money on the transac'
tion, paying out interest for nc
benefit return. On the Other
hand, if too early a date is SET
for repayment, the machine viii
not have had sufficient opportu'
nifty to make the requisite money
and the borrower may have diff.
\, ficulty in raising it elsewhere,
gpule 3 provides for some form o1
amortization, the system by
which the principal is repaid in
installments so that the amount
of the loan is continually dimin'
ished and in consequence the In
terest charges also. Such a sys
tenn is quite feasible when the
lean is really productive, when i
returns to the borrower a definite
revenue each year. Tables show
ing the payments required to pay
off principal and interest in vary
ing periods of time are appended
, to the bulletin and are recon
mended to the serious considera
tion of everyone who contem
plates borrowing money. In'
bulletin also advises the farme.
to secure the lowest possible IN
terest. At the first sight thl
seems too obvious to be wortl
mentioning. Of course the IN
terest should be as small as pos
sible. Everybody knows that
except the lender. But It tn
otuer rules are observed, if tn
borrower manages his financia
affairs soundly, he will be SUI
prised to find how much easier ]
IS to obtain favorable, terms
The right kind of lender doe