Abilene weekly reflector. [volume] (Abilene, Kan.) 1888-1935, 1915-05-13


on note attached to the certificate
The building and loan law provides that the
money accumulated by the sale of shares is
to be loaned to members who wish to borrow,
buy, build or improve property, or pay off
encumbrances. That is done by amortized
loans. An amortized loan is one that is ex-
tinguished by or through sinking fund. The
theory of a building and loan association loan
is that it is an advancement of the par value
of one or more shares, and that in time the
maturity of the shares will extinguish the loan.
But since the maturity of share depends on
the earning power of the association the date
of maturity cannot be definitely stated in adj
vance In modern practice the "definite-con-
tract loan" is substituted for the amortized
loan. That is to say, building and loan town
loans are now usually made on contracts
wherein the borrower agrees to make def
mite number of payments, each payment to be
a definite sum monthly or weekly, and the as
ISOLATION agrees that when the required num-
Der of payments have been made, the debt
shall be extinguished. Each payment is part
interest and part principal The borrower is
given the privilege to make additional, or ex-
ira, payments any month, and also has the
privilege of paying the whole of his debt any
time when he can find the money to do so.
The value of his shares is credit at time OF
settlement. Ten years or 120 months is the
popular term for maturity of shares and for
the payment of loans, but many associations
extend the time to twelve years, or IA months.
To meet the situation of the farmer, who
we know cannot make regular payments at
short periods on a loan and who, we believe,
needs extra longtime working capital at
minimum interest rate, the new law provides
for farm loan which may run twenty years
without renewal The interest rate on such
loans is determined by the dividend rate paid
for deposit money in the county where the
loans are to be made. One and one-half per
cent margin is allowed by the law. Thus, if
the rate on deposit money is four per cent, the
loan rate must not exceed five and one-half,
and no commission.
The interest on these loans must be paid
semi-annually, but the principal may be paid
off in odd sums at odd times. Absolutely no
stipulation in the contract as to the amount of
any partial payment, nor dates when partial
shall be made, except, that if the
loan is to run more than ten years the con-
tract may require an annual reduction of the
principal in sum determined by dividing the
principal by the number of years, which means
that the principal of twelve-year loan should
be reduced at least one-twelfth annually; a
fifteen-year loan one-ffteenth annually;
twenty-year loan one-twentieth annually.
When a partial payment is made on the
principal, interest shall cease on the amount
paid right then and there, and such partial
payments may be made whenever the farmer
wishes to make them, and the farmer has an
absolute right to pay off the whole indebted
ness any time he chooses, and interest can be
charged only on balance due at date of pay
nent. Let us recapitulate the scheme:
The true building and loan association plan