258 THE POPULAR SCIENCE MONTHLY 



association of the province of Saxony the amortization is £ per cent, 

 per year. On a loan made at 4 per cent, is added the f per cent, 

 amortization and ^ per cent, to cover the operating expenses of the 

 association, making a total of 5 per cent., and by paying this amount 

 annually for between forty to forty-five years the loan will be paid off. 

 The farmer in the meantime also has the privilege of paying it all or 

 in part at any time. After the loan has been made the rate of interest 

 can not be raised or the loan called in, so if the farmer has secured his 

 loan at a low rate of interest he can carry it until it has been amortized 

 by his annual payments. The Saxon farmers who in the nineties 

 borrowed at 3 per cent, and got par for their bonds are relishing this 

 feature now that the rate of interest has advanced to 4 per cent. 



However, many of the better farmers make no attempt to pay off 

 their loans any faster than is required through the annual amortization 

 payment, finding that they can get their credit cheaper in this way 

 than any other and can make more interest on the money used in their 

 business than they have to pay for it. The association also has the 

 provision that when 10 per cent, of the original loan has been paid an 

 additional loan can be made and in this way a farmer can continue to 

 carry indefinitely practically the same amount of loan on his property 

 if he finds it advantageous to do so. The average length of time loans 

 run in Saxony is about twenty-five years. 



By this method the farmer gets all the advantages of the money 

 market if money is tight — the rate of interest goes up and the price 

 of the Pfandbriefen go down when money is abundant and interest 

 rates low the price of Pfandbriefen go up. The farmer through his 

 bank watches the money market and takes advantage of the low points 

 in interest rates to secure his loan, and once made he is safe from hav- 

 ing his loan called in or his interest rate raised. 



Decentralizing the Business 

 A practical point in the operation of such a business is to make it 

 as convenient as possible for the farmer to do business with the land 

 mortgage association. The province of Saxony is a territory nearly 

 100 miles square and the association is located in Halle, a relatively 

 large city. For all of the farmers to come to the central association to 

 negotiate their loans would be impracticable and would diminish the 

 business very much. This problem has been solved by dividing the 

 province into districts 10 to 15 miles square and in each district is a 

 local officer of the association elected by the members in their annual 

 meeting. This officer assists the members in getting their loans, sends 

 in their applications, gives information concerning the association and 

 looks after the business in his district. When property is appraised 

 for loans, he is chairman of the committee making the appraisement. 



