The Monticellonian., 1915-09-16
RULES IN BORROWING MONEY
Three Fundamental Principles enum- erated Which Alone Make Credit
 Blessing and Not a Curse.

(Prepared by the United States Depart
 ment of Agriculture.b
 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 guid- 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;
 1. Make sure that the purpose for which the money is borrowed will pro duce return greater than needed to pay the debt.
 9 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 bor- rowed
 g. 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. If 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. If it is borrowed for a foolish purpose 1t will produce noth- ing and consequently there will be nothing with which to repay the loan. From this point of view 1t matters comparatively little whether the in- terest be high or low. IL is the re- payment of the principal that is the chief difficulty.
 Rules and 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 1t earns itself. For exam pie. if the money is used to buy 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 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, if 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 difficulty in ras- ing 1t elsewhere. Rule provides for some form of amortization, the sys- tenn by which the principal Is repaid in installments so that the amount of the loan Is continually diminishing and in consequence the interest charges also. Such system is quite feasible when the loan Is really pro- ductive, when 1t returns to the bor- rower a definite revenue each year. dDteS showing Ine payments required to pay off principal and interest in varying periods of time are append ed to the bulletin and are recom- mended to the serious consideration of everyone who contemplates bor- rowing money. The bulletin also ad- vises the farmer to secure the lowest possible interest At first sight this seems too obvious to be worth men, tioning, Everybody knows that-ex- cept 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 to obtain favorable terms. The right kind of lender does not want to foreclose mortgages; he wants his money back with a 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 CTS It is not so much a matter of driving shrewd bargain as 1t is of observing few fundamental princi- ples which alone can make credit a blessing and not curse.