BULLETIN 409, U. S. DEPARTMENT OF AGRICULTUEE. 



figure shown for extra cost in North Carohna is due, in part, to the fact 

 that with a legal interest rate of 6 per cent the lenders of that State 

 have made up in extra charges what the State law does. not permit 

 them to charge as interest. In some cases the difference between the 

 interest rates shown in the table and the estimated total cost may be 

 explained by the fact that interest is reckoned for a full year on a loan 

 which actually runs for only 9 or 10 months, though more often the 

 extra charge takes the tangible form of a bonus demanded by the loan 

 agent in payment for his services in "getting the money" or of a fee 

 for making out the papers. Especially in connection with loans on 

 chattel security is there Hkely to be considerable expense for making 

 out papers, recording the chattel mortgage, etc. In general, how- 

 ever, the extra charges are small where the interest rates are low, and 

 vice versa, so that the variations between different sections of the 

 country may be considered either on the basis of the nominal interest 

 rate alone or on the basis of the total cost. 



No simple explanation will account adequately for these variations 

 between one State or district and another. While some of the 

 factors involved are essentially natural conditions and are not readily 

 subject to change, others have been brought about primarily by 

 human agencies and may be modified considerably thi'ough voluntary 

 action. It is realized that any improvement in the farm-loan situa- 

 tion must be secured mainly through the modification of conditions 

 controlled by human agencies. Therefore, while some attention 

 should be given to natural conditions in order to show their impor- 

 tance as factors affecting interest rates and other charges on short- 

 time loans, the purpose of this discussion is primarily to show some 

 of the ways in which conditions actually are being modified so as 

 to enable the farmer to obtain better terms. 



IMPORTANCE OF NATURAL CONDITIONS. 



Climate, contour of the land, and soil are, for the most part, natm'al 

 conditions and, in the order mentioned, exert a relatively permanent 

 influence upon the interest rates and other charges on short-time 

 loans. Soil and to a less degree contour are subject to modification 

 as the result of human activity. Much of our soil has been impov- 

 erished through a continuous one-crop system. Sandy hillsides, 

 through open cultivation, often have been washed into gulhes. 



Because of the relative permanency of climate, contour, and soil 

 it is necessary to adapt farming methods and systems to these 

 factors rather than to attempt any material modification in the 

 natural conditions in the interest of any particular farming need. 

 Through the influence which they exert on farming and the results of 

 farm business, however, they become important factors indirectly 

 affecting interest rates on short-time farm loans. The influence of 



