20 BULLETIN 1048, U. S. DEPARTMENT OF AGRICULTURE. 
INTEREST COLLECTIONS IN ADVANCE. 
A second practice which has the effect of increasing interest cost 
is that of collecting the interest at the time the loan is made. As 
indicated in Table 5, 40 per cent of the banks follow this practice 
on 66 per cent of their loans to farmers on personal and collateral 
security. This would indicate that, taking the United States as a 
whole, interest is collected in advance on slightly more than one- 
fourth of all short-time bank loans to farmers. This practice, it 
may be noted, is most common in the eastern and southern sections 
of the country, and occurs only rarely in the central or western States. 
Thus in the States of Rhode Island, Connecticut, New Jersey, 
Pennsylvania, Virginia, West Virginia, North Carolina, South Carolina, 
Florida, Louisiana, and Tennessee, 90 per cent or more of the banks 
reporting collected interest in advance on a large majority of their 
loans. In Nevada, on the other hand, no bank reporting on the 
question followed this practice. In Wyoming, only 2 per cent 
reported collections in advance and on only 2 per cent of their loans. 
In each of the States of Iowa, Minnesota, North Dakota, South 
Dakota, Montana, Oregon, and California less than 10 per cent of 
the banks followed this practice on any part of their loans. The 
collection of 6 per cent interest in advance makes the rate on the 
credit actually obtained 6.4 per cent, while the collection of 8 per 
cent interest in advance makes the actual rate 8.7 per cent. 
NATURE OF SECURITY FOR FARMERS' PERSONAL AND COLLATERAL 
LOANS. 
Table 6 discloses the marked prominence of purely personal 
security in rural short-time credit. For the country as a whole, 36 per 
cent of farmers' short- time loans from banks reporting on this subject 
had no security other than the written promise of the debtor to pay 
at the proper time. In Iowa 66.3 per cent of the personal and col- 
lateral loans were of this nature. In other States, loans secured by 
the indorsement of one or more persons are the prevailing type. In 
Rhode Island, 97.5 per cent of the personal and collateral loans were 
of this class, as were also two- thirds or more of the loans in Vermont, 
Connecticut, New Jersey, and Pennsylvania. Combining the figures 
of the first two columns, it will be observed that in the United States, 
68 per cent of these loans were strictly personal or character loans. 
The lowest total occurs for Oklahoma, where 30 per cent of the loans 
rest on personal security only. 
Considering the kind of collateral pledged, mortgages on live stock 
are of most importance, 18.3 per cent of the total personal and col- 
lateral loans to farmers in the United States being based on this form 
of security. In the West South Central and Mountain States mort- 
gages on live stock are particularly common. 
