The Farmington times. (Farmington, St. Francois County, Mo.) 1905-1926, 1914-06-12
FIVE RULES FOR
BORROWING MONEY

pohNoW w INV moi'Ci
Washington, D. c., June l0--Five
rules designed to convince farmers
that there is no magis about credit
are set down in Farmers Bulletin
593, "How to Use Farm Credit, which
the United States Department of Ag-
ricuiture has just published. Unless
the farmer who is thinking Of Dor
rowing 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 farmers in
this country who are suffering from
to much as from too little credit.
OF these rules the three most i'm
portaut 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,
.. The length Of time the debt is
to run should have close relation to
The productive life Of the Improvement
for which the money is borrowed.
3. Provision should be made in
longtime loans for the gradual re-
duction 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 buy
equipment of some sort with which
to make more money there is all the
difference between folly and foresight,
extravaganza and thrift. If the mon
ey is borrowed for a wise purpose it
will produce enough to pay back prin-
Cipal and interest and leave fair
margin Of profit for the borrower into
the bargain. If it is borrowed for a
foolish purpose it will produce moth
ing and consequently there will be
nothing with which to repay the loan.
From this point of view it matters
comparatively little whether the inter-
est be high or low II is the repay
ment of the principal that is the chef
difficulty.
Rules two and three deal with the
most satisfactory ways of repayment
Underneath them both is the same
principals: Theloan must be repaid
with the money it earns itself. For
example, if 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 bN entire
ly repaid before the ten 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 re-
payment, the machine will not have
had sufficient opportunity to make
the requisite money and the borrower
may have difficulty in raising II else
where. Rule three provides for some
form Of amortization, the system by
which the principal is repaid in in
stallmcuts so that the amount of the
loan is continually diminishing and in
consequence the interest charges al
so. Such Il system is quiet feasible
when the loan is really productive,
when it returns to the borrower def
mite revenue each year. Tables show
ing the payments required to pay oil
principal and interest in varying per
rods Of time are appended to the bull
lcUn and are recommended TO the
serious consideration Of everyone who
contcmplatCs borrowing money. 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 rs
possible Everybody knows that
except the lender. But if the other
rules are observed, if the borrower
manages his financial affairs soundly,
he will be surprised to find how much
easier it is 10 obtain favorable terms.
The right Kind of lender doe, not
want to forccloSc mortgages; he wants
his money back with Il 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 borrow
ers. II is not so much a matter Of
driving Il 8hrewd bargain as it is OF
observing a few fundamental princi-
pies which alone can make credit a
blessing and not curse.