The Democratic advocate. [volume] (Westminster, Md.) 1865-1972, 1914-06-12
Five Rules For Borrowing Money.

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Five rules designed to convince
farmers that there is no magic about
credit are set down in Farmers Bull
letin 593 How to Use Farm Credit"
which the United States Department
Of Agriculture has just published.
Useless the farmer who is thinking of
borrowing money fully understands
these rules and in willing to be guild
ed by them, the Governments advice
to him liz: don't As it Is, there are
probably as many farmers ia this
country who are suffering from too
much as from too little credit
or these rules the three most i'm
portant are:
!. Make sure that the purpose for
which the borrowed money is to be
used will produce a return greater
than needed to pay the debt.
z The length of time the debt is
to rum should have a close relation to
the productive life of the improve
ment for which the money is borrow
ed.
g. Provision should be made In
longtime loans for the gradual reduc-
ton OF the principal.
The first rule Is Of course the key
70 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 foresight.
extravaganza and thrift IL the
money is borrowed for a wise pur-
pose 1t will produce enough to pay
back principal and interest and leave
fair margin or profit for the Dor
rover into the bargain. II 1t is Dor
rowed for foolish purpose 1t will
produce nothing and consequently
there will be nothing with which to
repay the loan. From this point of
view Il matters comparatively little
whether the interest be high or low.
II is the payment of the principal that
is the chief difficulty.
| Rules and deal with the most
satisfactory ways Of repayment IN
| derneath them both Is the same prin-
ciple: The loan must be repaid with
the money 1t earns itself For ex-
ample, il the money is used by buy
machine that will last ten years, the
machine must earn enough in that,
time to pay for itself or it never will
The loan, therefore, should be entire
ly 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, If too early date is set for
repayment, the machine will not have
had sufficient opportunity to make
requisite money and the borrower
may have difficulty In raising it else
where. Rule 8 provides for some
form OF amortization, the system by
which the principal IS repaid in in
stallments SO that the amount of the
loan Is continually diminishing and
in consequence the interest charges
also. Such system is quite feasible
when the loan is really productive,
when 1t returns to the borrower a
definite revenue each year. Tables
showing the payments required to
pay off principal and interest in vary
ing periods Of time are appended to the
bulletin and are recommended to the
serious consideration Of everyone who
contemplates borrowing money. The
bulletin also advises the farmer to
secure the lowest possible interest
At first sight this, seems too obvious
to be worth mentioning. Of course
the interest should be as small as
possible. Everybody knows that-ex-
cept the lender. But if the other rules
are observed, if the borrower man
ages his financial affairs soundly, he
will be surprised to find how much
easier it is to obtain favorable terms
The right kind Of lender does not
want to foreclose mortgages; he wants
his money back with fair profit, like
any other merchant. For money that
Is borrowed wisely, for money that is
sure to be repaid, he charges low in
terest.
This In fact Is why the government
has published these rules for borrow
ers. 1t is not SO much matter of
driving shrewd bargain as it is of
observing few fundamental prin-
ciples which alsone can make credit
blessing and not curse.