The Manchester journal. [volume] (Manchester, Vt.) 1861-current, 1914-06-25
FIVE RULES FOR
BORROWING MONEY

: farmers that there is no magic abou
credit are set down in Farmers Bul
n letin 593, How to Use Farm Credit,
4 (which the department has just pub
: lished. Unless the farmer who ]
; thinking of borrowing money full.
understands these rules and is willin,
to be guided by them, the Govern
ment's advice to him is: don't. As i
is, there are probably almost as man.
farmers in this country who are suf
fering from too much as from too lit
tie credit.
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 is
to run should have close relation 10
the productive life pof the improve
ment for which the money is borrow
ed.
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 fore
sight, extravaganza and trift. If the
money is borrowed for wise purpose
it will produce enough to pay back
principal and interest and leave a
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. 1t is the repay
ment of the principal that is the chief
difficulty.
Rules 2 and 8 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 exam
pie, if the money is used to buy ma
chine that will last 10 years, the ma
chine must earn enough in that time
to pay for itself or it never will. !,
The loan, therefore, should be entirely
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 re-
payment, the machine will not have
bad sufficient opportunity to make
the requisite money and the borrower
may have difficulty in raising it else
where. Pule 8 provides lnr some
form of amortization, the system by
which the principle is repaid in install
ments so that the amount of the loan
IS continually diminishing and in CON
sequence the interest charges also.
Such system is quite feasible when
The loan is really productive, when il
returns to the borrower a definite
'evenue each year. Tables showing
he payments required to pay off prin-
'ipal and interest in varying periods
If time are appended to the bulletin
md are recommended to the serious
of everyone who con
borrowing money. The
'ulletin also advises the farmer to
ecure the lowest possible interest. !
1t first sight this seems too obvious
o be worth mentioning. Of course,
he interest should be as small as pos
ible. Everybody knows that-except Q
he lender. But if the other rules a
re observed, if the borrower manages t
is financial affairs soundly, he will t
e surprised to find how much easier I
is to obtain favorable terms. The {
light kind of lender does not want to
oreclose mortgages; he wants his D
loney back with fair,proft, like any v
ther merchant. For money that is N
orrowed wisely, for money that is "
ire to be repaid, he charges low in N
rest. n,
This, in fact, is why the Government a,
as published these rules for borrow te
s. 1t is not so much a matter of -,
living shrewd bargain as it is of =
serving few fundamental princi- "
es which alone can make credit a
essing and not curse.-U. S. y
eekly News Letter.
-.--- II