The Tupelo journal., 1917-07-27
AMORTIZATION IS
/ FAVORITE METHOD
oD
Federal Farm Loan System
Based on This Plan, Says
. Quamme.
Amortization-What is it?

This word is rapidly attaining gen.
eral prominence and before long will
be placed in the same category as
preparedness" liberty" and ode
mocracy," and become a part of ev-
%eryone's vocabulary.
That is because this term applies to
a plan by which every person can be-
come a home or land owner. He SIM
ply reduces Indebtedness by INSTALL
ment payments.
E. G. Quamme, president, st. Paul
federal farm loan bank, is an en-
thusiastic advocate of this method.
Deadens Principal.
"The word amortization ITSELF"
he said recently, lis derived from the
same source as the words with which
we are all familiar, mortgage and
mortuary. AS applied to paying
debts, it practically mean deadening
the principal o fthe debt.
For example, if one owes 800
that has run at 5 per cent for n
year and he pays $25 and renews the
balance, it is clear that SIS Of the
S25 is applied to accrued interest,
and the remaining $40 is used to
diminish or deaden the principal.
That is, he has amortized or deadened
$40 of the 500 and has $50 of live
debt left.
at is patent that the payment APP
piled to the reduction of the princi-
pal of the debt is the amortized
part, and the balance is interest.
Not aHardship.
"The amortization plan of pay
ment is not a hardship on the indi-
vidual. People pay life insurance in
annual or semi-annual or quarterly
installments and rent in monthly in
stallments. These regularly fixed in
stallment periods of payment has
become almost an institution in
American life. Knowing, as the in
dividual does, when these INSTALL
ment periods come, he is prepared to
meet them.
Naturally, the American public,
when Shown that it is possible not
only to live as usual, but to acquire
property simply by applying a diff
ferent principle to an old installment
method of payment, is eager to try
it out.
r "The federal farm loan system is
based on the true amortization plan.
In contrast to the old method of loan
ing, the farmer can make applica-
ton to the federal land bank today,
and in SO years, if he chooses to al
low his loan to run that long, paying
S per cent interest and a little on the
principal, the loan will be paid.
Payable Twice a Year.
"Loans are payable by means of a
fixed amount every six months. Part
of this payment represents 5 per cent
of the unpaid principal for the pre-
vious six months and a part of it
represents a payment of the princi-
pal.
"The amount fixed for payment
each six months will be approximate
Nv 6 per cent on the loans and this
payment will liquidate eventually not
only the interest, but the principal.
"On $1,000 a man would pay ap-
proximately $50 every six months
completely paying his loan with in
terest by these payments in SO years.
son $1,000, the saving in inter
est by this method amounts in Sc
years to about 1925 over the old sys-
tenn Of paying interest on the full
principal for the full time. This saw
ing does not take into consideration
the additional savings made by the
lowering Of the rates from about IA
per cent, which is the average rate
of interest throughout the United
States on farm mortgages, to 5 per
cent.
Great Forward Step.
"In the enactment of the federal
farm loan act, America has taken a
great step towards individual owner
ship of land and properly equipping
it. The moment an individual ac-