Deming graphic., 1914-06-12
FIVE RULES FOR the
BORROWING OF MONEY

7
| Farmers l;ullciin j9I. How to Is,
Credit. which tn United. States DE,
iarimrnl "i Asrl"tiitnrr lln~ iu~t
lnihll,hrd nlrs- the farmer who /,
lhinhiH. "f b"rruwing money fully
understands these rules aud - will.
ing &" hr guided bN them. the Gov
,rnm,ul'- advice tu him il. DON'T
" n l.. there are probably almost
~ many farmers IN this country VII,
are ~nlirrn. irom loo much ~ from
too little credit.
Oi these rules the three most i'm.
p"rlant are:
!. Make sure that the pur-
pose for which the borrowed
money j. l." be- used will produce
return greater than needed
I" pay the debt
,. The length of time the
debt l. la run should have u
rl"-r relation in the productive
lilr al the Improvement for
which the money i, borrowed.
,. Provision should be- made
~ long time loans for the grad
nal reduction of the principal.
Th" first rule j. Of course the KEY
Ia the wise use of credit. Between
borrowing money to spend an ones
self and borrowing money 10 buy
equipment of some sorl with which
20 make more money there is all the
difference between folly and fore
~l"hl, r\traNa.anrc and thrift. II
the money Is borrowed for II wise
purpose it will produce enough to pay
back principal and interest and leave
n fair margin of profit for thc bor-
rover into the bargain. II il is bor
rowcd for n foolish purpose il will
produce nothing aud consequently
there will he nothing with which H.
repay the loan. From thi, point of
view II matters comparatively little
whether the interest be high or low.
II is the repayment of the principal
that i, the chief difficulty.
Rule> ) and 3 deal with the most
satisfactory ways of repayment.
Underneath them both is the same
principle: The loan must be repaid
with the money il earns itself For
example. if the money is used to buy
n machine that will last ten years.
the machine must earn enough in that
time I" pay for itself or il never will.
The loan. therefore. should be- en-
lirrly repaid before the ten years
are up or the farmer will lose money
on the transaction. paying out in
tercst for no benefit in return. On
the other hand, If too early date
Is set for repayment. the machine
will not have had sufficiently oppor-
tunlty to make the requisite money
and the borrower may have difficulty
in raising il elsewhere. Rule , pro-
yidcs for some form of amortization.
the system by which the principal is
repaid in installmcnis ~ that the
amount of the. loan IL continually
diminishing and in consequence the
interest charges also. Such a sys-
lem is quite feasible when the loan
is really productive, when il returns
lo the borrower II definite revenue
each year. Tables showing the pay
mcniS required To pay off principal
aud interest in varying periods of
time are appended TO the bulletin and
ar. recommended lo the serious con
liberation of everyone who contcm-
plates borrowing money. The bull
lciin also advises the farmers to ad-
,i~r~ the farmer to secure the lowest
possible interest. At first sight this
seems too obvious TO he worth men,
joining. OF course the interest should
be- rs possible. Everybody knows
that--cxcopt the lender But if the
other rules are observed. if the bor-
rover manages his financial affairs
-onndly, he will be surprised TO find
how much easier il is to obtain favor
able terms. The right kind of lender
dies not want to forcclosc 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 government
has published these rules for b"r
r"Wrrs. II is moi 81 much u matter
If driving n shrcwd bargain rs il
T. nc nhsnrV;ny N -Four fnnJon,anto n I