The Beaver herald. [volume] (Beaver, O.T. [Okla.]) 1895-1923, 1914-06-25
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HOW TO USE FARM CREDIT.

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Five rules designed to convince
farmers that there is no magic about
credit are set down in Farmers Bulle-
tin 5o3 which the United States De-
pertinent Of Agriculture has Just pub.
lished Unless the farmer who il
thinking Of borrowing money fully un.
derstands these rules and is willing to
be guided by them, the Government
advice 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 too little credit.
OF these rules the most important
are:
/. Make sure that the purpose for
which the borrowed money is to b,
used will produce return greater
than needed to pay the debt
,. The length Of time the debt is tc
ran should have a close relation to the
productive life OF the improvement foi
which the money is borrowed.
3. Provision should be made in Ions
time loans for the gradual reduction
Of the principal.
The FIRST rule is Of course the key to
the wise use Of credit. Between Dor
rowing money to spend on ones self
and borrowing 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. II the money is Dor.
rowed for a wise purpose it will pro.
duce enough to pay back principal and
interest and leave n fair margin OF
profit for the borrower into the bar.
gain. II it is borrowed for a 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 difficulty.
Rules and 3 deal with the most
satisfactory ways of repayment. Un.
ierneath them both is the same prin.
sipal the loan must be repaid with
the money il earns itself. For tx.
ample, If the money is used to buy p
machine that will last ten years, the
machine must earn enough in tina,
time to pay for itself or it never will
The loan, therefore, should be entire.
ly repaid before the ten years are NJ
or the farmer will lose money on the
transaction, paying out interest for. nc
benefit in return. On the other hand
II too early date is set for the repay.
ment, the machine will not have had
sufficient opportunity to make the re-
quisite money and the borrower may
have difficulty in raising it elsewhere
Rule provides for some form OF
amortization, the system 10y which the
principal is repaid in installments SO
that the amount Of the loan is contin
ually diminishing and in consequence
the interest changes also. Such a sys-
tenn is quite feasible when the loan il
really productive, when it returns C
the borrower definite revenue each
year.
Tables showing the payments requir.
I'd 20 pay of principal and interest in
varying periods Of time are appended
to the bulletin aud are recommended
10 the serious consideration of every
one who contemplates borrowing mon
ey. The bulletin also advises the
farmer to secure the lowest 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 il the other
rules are observed, il the borrower
manages his financial affairs soundly
he will be surprised to lind how much
easier it is to obtain favorable terms
The right kind OF lenderdoes 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 in
terest
This is the fact why the government
has published these rules for borrow.
era. is not so much a matter OF
driving shrewd bargain as it is of
observing few fundamental princi-
ples which alone can make credit a
blessing and not a curse.
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