Charlevoix county herald., 1914-09-12
Continued from last week.
Repayment and Duration of Loan.

This brings us to the second rule
TO be observed in the use of farm
credit. The contract should provide
for the repayment of the principal
at the most convenient time; that is,
when the farmer is most likely to
have the means wherewith to repay it.
The third rule is closely related to
the second. 1t has TO do with the
duration of the loan, or the time for
which the loan is to run. If man
borrows to buy fertilizer which is to
be used up in one year, the loan ought
not TO run for more than a year. II
he is not able to pay the loan with his
first crop, he will never be in a posi-
tion to pay it, unless he draws upon
some other source for the money.
This violates the first rule. Again, it
should not be for a shorter period
than the growing season of the crop;
for that would violate the second rule.
If he borrows for the purpose of buy
ing a twine- binder which will help in
the harvesting of several grain crops,
each crop should not only pay the
annual interest charge, but part of
the principal as well. A small loan
lasts only few years, may not give
much trouble and may not require
any special method of repayment. But
a heavy loan, for the purchase of land
or the making of costly and durable
improvements, may lay considerable
financial strain upon the farmer. Any
method which will relieve that strain
is, therefore, a matter of Importance.
In order to reduce the strain as
much as possible the loan should be
for a long period of time. In no case,
of course, as stated above, should the
loan Outlast the improvement. If the
borrower wants the money to build a
sio, and the silo will last 10 years,
the loan should not be for more than 10
years. 1t is better to err on the safe
side, if at all, and pay the debt off
in less than 10 years rather than to
let it run too long. If the silO will
not pay for itself in that time, it
never will. On the other hand, it can
scarcely be expected to pay for itself
in one or two years. Unless the bor-
rover has other resources, it would be
a financial strain if his debt has to be
paid so soon. 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 This will do away with the
necessity of having the loan fire.
quently renewed, and it will free the
borrower from subjection to an un-
scrupulous lender who might refuse
to renew a short-time loan and insist
on foreclosure.
Repayment of Long time Loans.
The fourth rule is that provision
should be made in the longtime loan
for the gradual reduction of the prin-
cipal. There are two well-recognized
ways of doing this. One is to pro-
vide in the note that, on any interest
date, the borrower may, if he SO de-
sires, repay part of the principal.
As the principal is gradually reduced
the annual interest charge is likewise
reduced, and by paying the same sum
annually, the debt is gradually wiped
out. Another method is to provide
in the note itself for a definite rate Of
amortization by fixed annual or semi
annual payments. Each Of these fixed
payments not only pays the interest
but a small part of the principal be-
sides, eventually wiping it out COM
pletely. Farmers are strongly ad-
vised, in all long time loans, to insist
on one or the other of these methods
of repayment. 1t may be necessary
to organize and work toOether in
order to secure these and other favor
able terms.
Rates of Interest.
The fifth rule is that as low interest