Installment Note Guarantees by Surety Companies

The sale of commodities on the installment plan has grown to enormous proportions. It is estimated that 70% or more of all automobiles sold at retail are sold on the installment plan; and a large percentage of graphophones, washing machines, vacuum cleaners, and the like, are sold under the same plan. These sales are made on the basis of a certain amount in cash and the balance payable in twelve or more equal monthly installments, the deferred payments being represented by promissory notes. Banks, as a rule, do not accept notes having maturities beyond six months, so that banks have, for the most part, been unwilling to accept this class of paper directly from dealers. The result is that a large number of finance companies have been formed throughout the country for the purpose primarily of discounting or purchasing this class of paper; and in many cases the manufacturer finances the installment sales of its product.