Ladysmith news-budget. [volume] (Ladysmith, Rusk County, Wis.) 1907-1927, 1914-10-09
WARNING AGAINST CHEAP
LOAN SCHEME


men were willing to work in ordel
to make dishonest living. The field
of rural credit is already producing
a number of examples. Certain com
panies are actively at work promis
| ing farmers cheaper money than any
body else is able to get on equally
good security. The eagerness WIFI
which some are accepting the bal
| is one indication of the need there
is for a sound system of rural cred
it, 1t is not wholly the fault of the
farmer who is taken in. A great
deal of mental energy, combined with
marvellous skill, is expended in pre-
pairing contemplating circulars
| which seem to promise the farmer
everything, but really promise him
nothing. If as much thought and skill
| We're exercised in trying to concert
sinners, we would be very near the
millennium.
Stripped of verbiage and words
which darken rather than enlighten
the scheme is essentially as follows:
Such a company offers to lend you
money on good security at, say, 3
per cent interest, and to allow you
to repay the loan in easy monthly
installments on the amortization
plan. This sounds alluring, and, if
you are not too persistent in asking
what you are to get and when you
are to get it, you sign an application
for a loan on these favorable terms.
In a few days you receive from such
company a contract for the loan for
which you applied. The contract
which you receive is duly signed by
the officers of the company. Then
you realize that the application
signed by you and the contract
signed by the officers of the COM
pany together constitute a valid con-
tract, and that you are now in for it.
Under the terms of the contract
you are to begin at once paying off
the debt of, say $1,000. at the rate
of $40 a month, but you have not
got your $1,000 yet. Moreover, you
do not know just when you will get
it. The only thing you know is that
you have got to go right on paying
$40 a month. You have, however, the
uho hn n
has the money to spare, you will get
your loan. Another way of saying
the same things is that when your
turn comes, you will get it. This
means that such a company has not
got the money now, and that there
are several other gentlemen whose
turns come before yours. AS fast as
the company gets money it lends it
out to these men each in his turn.
When your turn comes, if the com
pany lasts that long, you will get
your money.
Now, where does this kind of com
pany get the money which it is 60
ing to lend tot you and the other
gentlemen who have signed these
contracts? Why, it gets it from you
and those same gentlemen, and from
no one else. Speaking to all of you
collectively, it says, in effect, Gen
tlemen, this company has no mon
ey of it's own, but if you will pay
your money into it's treasury, we
will then be glad to lend it back to
you, if you will give good security on
favorable terms, indeed"
If such a company ceased getting
new contracts, it could not lend
you your thousand dollars until you
had paid in a thousand. It has no
other source of income, and it can
not create something out of nothing.
If it continues to get new contracts
after yours, then it can take the
money paid in by those who follow
you to lend to those who precede
you In this way your turn may come
before you have paid in quite the
full amount which you expect to Dor
row. But those who follow will have
to wait still longer on that account.
If new applicants should sign up rap
idly and in large numbers, and be-
gin paying their good money into the
company, the company may then be
able to give you your loan tolerably
early. But that only postpones the
evil day. Those who follow you in
such numbers, will have to wait long
er and longer, unless the applicants
should continue increasing in a geo
metrical ratio. But the longer this
sort of thing goes on the greater
will be the smash when it comes.
Unless you have been initiated in
| to the mysteries of geometrical pro-
gression you may imagine that this
sort of thing can go on Indefinitely;
but if you will take your lead pencil
and figure awhile you will find that
in order that you may get your loan