Washington standard. [volume] (Olympia, Wash. Territory) 1860-1921, 1914-06-12
GUvEKNMtNl TELLS
SECRETS OF CREDIT
LATEST BULLETIN SHOWS FAR
MERS HOW TO BORROW
MONEY.

mers that there is no magic about
credit are set down in Farmers Bull
letin 500, How to Use Farm Credit"
which the United States department
Of agriculture has just published. Un-
less the farmer who is thinking Of
borrowing money fully understands
these rules and is willing to be guided
by them, the governments advice to
him is: don't. AS it is, there are
probably almost as many famers in
this country who are suffering from
too much as from too little credit" il
the way the advance report puts it.
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 return greater
than needed to pay the debt.
2. The length of time the debt il
to run should have a close relation to
the productive life of the improve
ment for which the money is borrow
ed
3. Provision should be made in
longtime loans for the gradual reduc-
ton of the principal.
First Rule is the Key.
1.-THE first rule is of course the key
to the wise use of credit" the advance
report says. Between borrowing
money to spend on ones self and bor-
rowing money to buy equipment OF
some sort with which to make more
money there is all the difference be-
tween folly and foresight, extrava-
gance and thrift. If the money is bor-
rowed for wise purpose 1t will pro-
duce enough to pay back principal
and interest and leave a fair margin
of profit for the borrower in the bar
gain. If it is borrowed for foolish
purpose it will produce nothing and
consequently there will be nothing
with which to repay the loan. From
this point of view it matters compare
lively little whether the interest be
high or low. 1t is the repayment OF
the principal that is the chief difficult
ty.
"Rules and 3 deal with the most
satisfactory ways of repayment. I'M
derneath them both is the same prin-
ciple: The loan must be repaid with
the money it earns itself. For ex-
ample, il the money is used to buy
a 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
" repaid before the 10 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
the requisite money and the borrower
may have difficulty in raising it else
where.
Rule provides for some form OF
amortization, the system by which
the principal is repaid in installments
so that the amount OF the loan ID
continually diminishing and In con-
sequence the interest charges ALSO
Such a system is quite feasible when
the loan is really productive, when 1t
returns to the borrower definite
revenue each year. Tables showing
the payments required to pay on
principal and interest in varying per-
iods of time are appended to the bui-
letin and are recommended to the
serious consideration of everyone who
contemplates borrowing money.
Get Low Interest.
"The bulletin also advises the far
mer to secure the lowest possible in
terest. At first sight this seems too
obvious to be worth mentioning. or
course the interest should be as small
as possible. Everybody knows that
except the lender. But if the other
rules are OUSSTNSu, IL Vic pciiO"SA
manages 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 interest.
"This in fact is why the govern
ment has published these rules for
borrowers. 1t is not so much mat
ter of driving a shrewd bargain as 1t
is of observing few fundamental
principles which alone can make
credit blessing and not a curse"