Paying Dear for Money.

Wairarapa Standard, Volume XVIII, Issue 1676, 20 February 1885, Page 2

Paying Dear for Money.

Many people, both town and country settlers have sometimes occasion to borrow money on freehold security. The ordinary way of doing this is to go into the open market and

' ll; ■'i- 1 money from a louder, paying the ] <uii- nt i.itc of interest and giving ft mortgage ' upon ihc leal csUlu on the security el which j the loan has been obtained. Money can usually be obtained in this way at from 7 to 8 per cent, and possibly at even a rather lower rate when the sum borrowed is large and the security first class. Money may also be borrowed by members of Building Societies who are entitled to obtain loans proportional 3 in amount to the number of shares which they hold on the security of land, and buildings which they propose to erect thereon. ’The principal and interest of those loans are liquidated by a series of monthly payments extending over the period during which the society continues in existence. This system has not worked badly in the Wellington district during many years past, and hundreds of houses and freeholds have been acquired under it. Nevertheless the actual rate of interest paid by the borrowers under this plan is really very high, though, while making monthly payments in lieu of rent, the borrrowers may not feel the disbursement to press heavily. Nevertheless, now and then when a Building Society does not runjout in the period expected, a borrower may awaken to the conviction that he is paying rather high for his loan. Here is a case in point. At the tenth annual meeting of the Wellington and Hutt Building Society, Mr P. W. Stevens complained that the Society had run on too long and that consequently he was paying heavily to it. He had joined the society at the commencement of 1875, when the Secretary told him it would run out iu eight years. He took up 14 shares altogether. On several occasions he asked for a statement of his account, and could not get it. He had paid .£1260 for the use of £525 for ten years. Now assuming that the figures given by Mr Stevens are correct, it seems that to pay £1260 for the use of £525 for ten years is a pretty high rate of interest. These Building Societies prove very profitable investments to those shareholders who do not borrow on their shares. Those who do borrow, have the repayment of principal and interest made easy for them by the monthly contribution system, but in the end it is out of their pockets come the large profits made by the investing shareholders who do not borrow at all. If a man wants to borrow £2OO to build a house on a freehold site already paid for, he would find it cheaper to get the money for say 5 years at 7 per cent and thou repay it, theu he would by taking shares iu a Building Society and borrowing upon them.