The Taney County republican. (Forsyth, Mo.) 1895-1992, 1914-06-25
Five Rules for Borrowing Money.


credit are set down in Farmers Bulle-
tin s93, How to Use Farm Credit"
which the department has just pub
lished. Unlessthe farmer who is think
ing Of borrowing money fully under
stands these rules and is willing to be
guided by them, the governments ad'
vice to him is, don't. As it 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 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.
Q. The length OF time the debt is
to run should have a close relation to
the productive life OF the improvement
for which the money is borrowed.
3. Provision should be made in
longtime loans for the gradual reduc
ton 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 equip
ment Of some sort with which 10 make
more money there is all the difference
between Jolly and foresight, extraya-
gance and thrift. II the money is
borrowed for wise purpose it will
produe enough to pay back principal
and interest and leave a fair margin Of
profit Tor the borrower into the bargain.
II il is borrowed for foolish purpose
it will produce nothing and conse'
quently 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. It is the repayment Of the pfin'
cipal that is the chief difficulty.
Rules D and 8 deal with the most
satisfactory ways Of repayment. UL-
derneath them both is the same prin'
ciple: The loan must be repaid with
the money il earns itself. For ex-
ample, if the money is used 10 buy a
machine that will last 10 years, the
machine must earn enough in that time
to pay for itself or it never will. The
loan, therefore, should be entirely re-
paid before the 10 years are up or the
farmer will lose money on the trausac
tion, paying out interest for-no benefit
in return. On the other hand, il too
early date is set for repayment, the
machine will not have had sufficient
opportunity to make the requisite mon
ey and the borrower may have difficult
ty in raising elsewhere. Rule 3 pro-
vides for some form OF amortization, the
system by which the principal is re-
paid in installments so that the amount
Of the loan is continually diminishing
and in cosequenc the interest charges
also. Such a system is quite feasible
when the loan is really productive,
when it returns 10 the borrower a def
mite revenue each year. Tables show
ing the payments required to pay of
principal and interest in varying periods
Of time are appended TO the bulletin
and are recommended TO the serious
consideration Of every one who con-
templates borrowing money. The
bulletin slao advises the farmer TO Sc
cure the lowest possible interert. At
first sight this seems too obvious to be
worth mentioning. OF course, the in
terest should be as small as possible
Everybody knows that-e1cept the
lender. But il the other rules are OBJ
served, il the borrower manages his
financial affairs soundly he will be sur
prised to find how much easier il is to
obtain favorable terms. The right
kind Of lender does not want to fore
close mortgages; he wants his money
back with fair profit, like any Other
merchant. For money that is Dor
rowed wisely, for money that is sur: to
be repaid, he charges low interest.
This, in fact, is why the govern
ment has published these rules ior
borrowers. II is not so much matte
Of driving a shrewd bargain as il is o
observing a lew fundamental principles
which alone can make credit blessing
and not curse.
Rsssian Fly Bulletin.