The Raymer enterprise., 1915-09-16
RULES IN BORROWING MONEY
Three Fundamental Principles Enum
Grated Which Alone Make Credit
. Blessing and Not Curse.

tUfvv V0uUaWGUkAl pTtuCiPtSb cu0W
Grated Which Alone Make Credit
Blessing and Not . Curse.
prepared by the United States Depart.
ment of Agriculture
Three rules designed to convince
farmers that there is no magic about
credit are set down In Farmers bulle-
tin 593. How to Use Farm Credit"
Unless the farmer who Is thinking Of
borrowing money fully understands
these rules and 10 willing to be guild.
ed by them. the governments advice
to him is: don't. As II is. there are
probably almost as many farmers In
this country who are suffering from
too much as from too little credit.
OF these rules the three most i'm.
portant are:
!. Make sure that the purpose for
which the money is borrowed will pro
duce return greater than needed to
pay the debt.
2. The length OF time the debt is
to run should have a close relation
to the productive life OF the improve
ment for which the money 10 bor-
rowed
3 Provision should be made in
long time loans for the gradual reduc-
tion 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 thrift. II the
money is borrowed for wise purpose
1t will produce enough to pay back
principal and interest and leave
fair margin of profit for the borrower
into the bargain. II It is borrowed for
q foolish purpose II will produce moth
ing and consequently there will be
nothing with which to repay the loan.
From this point of view ii matters
comparatively little whether the in
terest be high or low. 1t is the re-
payment Of the principal that is the
chief difficulty.
Rules 2 and 3 deal with the most
satisfactory ways Of repayment. Un-
derneath them both Is the same prin-
ciple: The loan must be repaid with
the money II earns itself For exam
pie. II 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 II never
will. The loan. therefore. should be
entirely repaid between the ten years
are up or the farmer will lose money
on the transaction. paying out inter.
est for no benefit In return. On the
other hand. II 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 dificulty In rails.
ing u elsewhere. Rule provides for
some form OF amortization. the sys-
TEN by which the principal IL repaid
In installments SO that the amount OF
the loan is continually diminishing
and In consequence the interest
charges also. Such a system is quite
feasible when the loan is really pro-
ductive. when 1t returns to the Dor.
rover q definite revenue each year.
Tables showing the payments required
to pay OF principal and interest in
varying periods Of time are append
ed to the bulletin and are recon.
mended to the serious consideration
OF everyone who contemplates bor-
rowing money. The bulletin also ad.
yises the farmer to secure the lowest
possible interest. At first sight this
seems too obvious to be worth men
tioning Everybody knows that-e1.
cept the lender. But II the other
rules are observed. II the borrower
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 q fair
profit, like any other merchant. For
money that is borrowed wisely. for
money that is sure to be repaid, be
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 shrewd bargain as 1t is OF
observing a few fundamental princi-
Piles which alone can make credit
blessing and not curse.