Show PUZZLE OF WHY DEBT HELPS SOME SOW afi i BU W I 1 HARMS OTHERS EXPLAINED s how flow a debt can be put to work to increase earn inge ings thrift and loan loans go hand in hand r ki 1 to aid the industrious rw tho true use of debt in personal and business affairs remains something of a nuzzle uzzle to many people to some the ery cry word debt a sig ignites nines misfortune while others merely fal 1 l to understand the ways in which thea the can put a debt to work for them to increase their earning earnings the committee on public education of the american bankers association has undertaken in the following discussion of how and why banks loan money to clear up these misunderstandings some people think that the t to incur 11 debt at the ban bana Is t unwise or a it r on their badness business ettna u ada inz this lit not the case here the debt its 1 contracted for binate its purposes incurring debt to live beyond one a income la to tor nothing no to thrifty person would do and careless us ot of credit leade leads to extravagance and disaster but i wise willa borrowing N I 1 an encouragement to thrift and industry the brat first function of the banker la Is to encourage industry and thrift 80 0 o that a tare lartis fund of bank de do I 1 posits may be accumulated this fund la often of tea likened to a reservoir in which water 6 I 1 fc accumulated cumulated for community need tia banker then loan I 1 OM fund to those con coo ducting the business ot of the corn com mu ity the banker basea bases credit on an what are known as a the three ca Us ot of credit character capacity and capital character la is an impera uve business busl nesa allied with character la in Ca before 3 making a loan a banker into consideration the capacity of the applicant that ie in his ablutz to earn through hia his honesty and ILIS industry capital la is a mana worth tn in money mor chandis lie and bondi bonds or landa which may inay be bo given a collateral in a security of a loan 3 0 to make it safe n let lot us consider the business transaction of ur mr smith the storekeeper he jig finds with hia his business bisi increasing that h hs need needs a is larger stock of gooda aleo also some somis ot of his customers cus tomera do cot not pay cash and their accounts acco unta must be carried until pay par dy day he ile must hofe inor money br his hl business so le boea coea to hl it tanker anker for or adzic the banker aj mr to a submit a statement eta of hia his N unit ess chowing what he owna owns jj what h owes lie knows smith a character and responsibility from hia his oberry of his dealings and from the confidence that POO deorle Is have tn in bl him it U he ands mr smiths statement and the progress he la lis making factory he will win be bo glad g to con sider the best method ot at loaning him the needed funds i W how money IS I 1 loaned r 1111 money oney la loaned by banka banks on ott straight notes on indorsed notes on collateral notes on 00 bills receivable and on tr md ur mr smith may be told by the banker that because he has ha suM sufficient clent money tn in bla his business and manages it well the bank will extend him credit without hia his putting up 09 guy a security beyond his own word of honor evidenced by hia ilia note let us aay say that mr ur smith needs a maximum amount ot during his busiest season and that the bank baa has consented to grant gmt bin such a line me ot of credit mr smita could come to the bank and mal 0 out a note for or any portion or of all at t thia amount tor for a car ar r time 0 to gl alx months to pay lom ome blue bills be hs needs say he that within sixty days he will receive from hia his charge customers customer enough ness to repay this amount he therefore makes a sixty day dar note which the banker discounts at the PrOTA rate rats ot interest let us say 6 per cent and lad places the proceeds eda to mr ur smiths credit how much doea does he credit to mr smiths account six per cent on 1500 tor for sixty days la is IS 5 thi amount the banker deducts at the uza ume 0 the boote la Is made it beins the interest which he h charges mr ur amith or r the use ot of the money he ile then credith mr ur smith with the proceed proceeds ot of he note or 1495 95 W N ben hen un tho nole arte Is to due in clity day days mr has recci received ved payment from his customers ur and be he pay pays the batu the bank batik mark marks the not note pud paid and return returns tt it to mr dr lilith I 1 mr smith smithe a business buet condition wore were not bronx strong to war rant granting hini unsecured c kedit the banker might say ay to mr nir S wraith 1 I want to help you but you will have to get the indorse rilent ot of your trl rit eid bAd mr jono jones ajoue is I 1 known to the banker as a very ral reliable lable and responsible 1 man should be be willing to hey help mr smith he will write his name on the back of j ur r smith a note and it smith cannot par pay the note when hen dua da mr jones will bave have ta to adgy in another carthe binker still aurous to help belp dewith might aar say 1 I to loan you up to 2500 bat you must secure the loan with the boods which you pur chu chas cor tor that mount amount and with oa som goodse mr smith would lure bays to va warehouse the tho mer mar cLan disis tred used aa as in such way that it maht be b easily identified through re r calpos aj as bev bekc ng the bank banks pr property oper t F nul the natt te Is paid it U smith boand himself unable to pa f the banker could sell ell tho the mert berthaa haa dla dise and use the proceed ii to pay the note U the goods baroug it mor more than the amount ot of the note the tho bank would pay the tho excess to mr my tt if the amount were not enough the bank would look to mr smith to make food good the different J A mortgage lana loans lobaj antnet far tenn tande lands called loana are u gregr atly made ta country districts if mr smith lacklan aa an tu dorser or suf uc collateral or business star taci izz I 1 r mod a bra farm free tree of 0 debt be he might givis ft a mortgage oa an it a j ahe lb procedure would be ome some what hat different from loaning against dul the th law alx lx realizing the th useful lacs place tarm arm aaa ai bom homs owner occupy protect protects atheni 10 A special wilmer iiii iner it to the leader lender aa case ot at duurt oa on a mort mortgage mor icaco sage loan you must gj ge q thil this owner wirner ot of land one year after ratter fter er leg ing notice that you expect t U lell sell blis land to pay day the tb ruo mortgage and a ad re redeem destri the debt chis is t lallon tl uie 10 arlod of ur smith till still another method kopea to obtain foods from rora his banker pe ve has sold old say ay a foo bill of to mr ilir U aa a R deahr in a smaller com cornin inley who saint at son 11 the goods to his hl ova own customers lefore a he can ay smith smith SULIM ay ty to brown it yoo you cant nt ir pry 7 each casu give me a ninety day not I 1 atu will discount dia count it aad lud got immediate cash 0 it from ay my baix I X will VW dalre to pay a per eat illert late reit to do ao so and I 1 shall vant ant you to tel pay that interest mr tir drown amsa and makes hie his ninety day dats for or with inter eat it at 9 per vat cent ur smith thil MIS note tot to the bank which ail ad lincea him credit tot or 1500 when the bank col collect lecta the note from drown 1111 ninety nety day days later it receives 1507 ca the added aided 7 CO betas the 6 per tn terest charge for or the hie us CC c the money for or tha almedy day perica ot of the note TL tassa 3 are the tarus tar us way wayll in a which the bank serves ite its cora inanity by 0 h r through loani loans the accumulated witt ot of the cou at the disposal diep oeal ot of beslu and i 4 |