Little Falls herald. [volume] (Little Falls, Morrison County, Minn.) 1889-1950, 1914-06-26
1.-THE WEEKLY news IlEhS'
ISSUED BY AUTHORITY OF THE
SECRETARY OF AGRICULTURE.
-. OF THE UNITED STATESa
Five Rules For Borrowing Money

credit are set down in Farmers, Bplle-
tin, 593, elbow to Use Farm Crehit,'
which the department has just publish
ed. Unless the farmer who is think
ing of borrowing money fully under
stands these srules and is willing to be
guided by them, the Government g adj
Vice to him is: don't. AS it is, tner>
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 inn
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.
2. The length of time the debt is
to run should have close relation to
the productive life Of the improve
ment for which the money is borrow
ed.
3. Provision should be made III
long time 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 puy
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 a wise purpose it will
produce enough to pay back principal
and interest and leave fair margin
of profit for the borrower into the
bargain. If it is borrowed for a fool
ish purpose it will produce nothing
and consequently there will be moth
ing with which to repay the loan.
From this point of view it matter,
comparatively little whether the in
terest be high or low. It is the re-
payment Of the principal that is the
chief difficulty.
Rules 2 and 3 deal with the most
satisfactory ways of repayment. I'm
derneath them both is the same pr1ii-
ciple: The loan must be repaid with
the money it earns itself. For e2>
ample, 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 will. The
loan, therefore, should be entirely re-
paid before the 10 years are up or the
farmer will lose money on the tran
saction, paying out interest Tor no
benefit in return. On the other hand,
if too early date is set for repay
ment, the machine will not have a
sufficient opportunity to make the
requisite money and the borrower may
have difficulty in raising it elsewhere.
Rule 3 provides for some form OF
amortization, the system by which the
principal is repaid in installllents so
that the amount Of the loan is contin-
ually diminishing and in consequence
the interest charges also. Such sys-
tenn is quite feasible when the loan is
really productive, when it returns to
the borrower definite revenue each
year. Tables showing the payments
required to pay off the principal and
interest in varying periods Of time are
appended to the bulletin and are
recommended to the serious consider
alton of everyone who contemplates
borrowing money. The bulletin also
advises the farmer to secure the low
est possible interest. At first sight
this seems too obvious to be worth
mentioning. OF course, the interest
should be as small as possible. Every
body knows that-except the lender.
But if the other rules are observed, if
the borrower manages his financial
affairs sound]y, 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 on
mortgages; he wants his money back
with a fair profit, like any other mer-
chant. For money that is borrowed
wisely, for money that is sure to be
repaid, he charges low interest.
This, in fact, is why the Govern
ment has published these rules for
borrowers. It is not so much a matter
Of driving shrewd bargain as it is
Of observing few fundamental prin-
ciples which alone can make credit
blessing and not a curse.
Selecting the Breed Of Sheep