The Madison journal. (Tallulah, Madison Parish, La.) 1888-current, 1915-09-18
RULES IN BORROWING MONEY
Three Fundamental Principles Enum-
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 or
borrowing money fully understands
these rules and is willing to be guild
| ed 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
too much as from too little credit.
OF these rules the three most I'M
portant are:
l. Make sure that the purpose TOT
which the money is borrowed Will pro
duce return greater than needed 10
pay the debt.
2. The length of time the debt is
to run should have close relation
to the productive life of the improve
ment for which the money is DOT
rowed.
3. Provision should be made IN
long time loans for the gradual reduc-
ton 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 puy
euuipment of some sort with wnlcn
; to make more money there Is all the
difference between folly and lore
! sight, extravaganza and thrift. III 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 1or
5 a foolish purpose 1t will produce notn
= ing and consequently there Will Dc
nothing with which to repay the loan
r From this point of view IT matters
= comparatively little whether the IN
terest be high or low. 1t is the re
s payment Of the principal that Is the
K chief difficulty.
Rules 2 and deal with the mos
l. satisfactory ways Of repayment. Un
derneath them both is the same prln
ciple: The loan must be repaid witt
u the money ii earns itself. For exam
y ple, IL the money Is used to buy
IS machine that will last ten years, tn
machine must earn enough in tina
"a time to pay for itself or 1t neve
III will. The loan, therefore, should b
er entirely repaid between the ten year
are I'D or the farmer will lose none
IT. on the transaction, paying out inte
g. est for no benefit in return. On tn
e. other hand, if too early a date is sc
for repayment, the machine will nc
have had sufficient opportunity
III make the requisite money and tn
borrower may have difficulty in raj
10 ing It elsewhere. Rule 3 provides II
some form of amortization, the sy
tenn by which the principal is repai
in installments so that the amount
ily the loan is continually diminishir
3D. and in consequence the intere
tie charges also. Such a system is qui
an feasible when the loan is really pr
ductive, when 1t returns to the DC
he rover a definite revenue each yea
Tables showing the payments require
nv to pay off principal and interest
he varying periods of time are appen
at. ed to the bulletin and are recol
mended to the serious considerable
,,r of everyone who contemplates bt
o.s rowing money. The bulletin also
,- vises the farmer to secure the lowe
-, possible interest. At first sight I'll
seems too obvious to be worth me
- tioning. Everybody knows that
go cept the lender. But II the 9th
~ rules are observed, IL the borrow
,od manages his financial affairs sound
49, he will be surprised to find how mu
easier it is to obtain favorable tern
- The right kind Of lender does I
want to foreclose mortgages;
: ad wants his money back with +
~ profit, like any other merchant.
ON money that is borrowed wisely.
|, of money that is sure to be repaid.
charges low interest
laos This in fact is why the governm'
cir has published these rules for borrt
and ers. It is not so much matter
nos. driving a shrewd bargain as it is
,de, observing a few fundamental priI
can pies which alone can make credit
= blessing and not curse.