The Bible is silent on when we can owe money. It warns against the dangers of debt, but does not preclude it. Where possible it is best to avoid debt – resisting the endless offers to buy now and pay later. It is better to choose to wait until you have the money to purchase the item you need.
We borrow money for a home mortgage, to invest in a business, or to train for a career. A business owner may need to raise capital for the start or purchase of a business, or possibly to provide a source of working capital. Sometimes we need to borrow money to invest in a better future. We believe this is permissible if the following four questions can be answered positively:
Can I pay it back?
Take time to work out exactly what you can realistically afford to pay on an on-going basis.
If the debt is too high then the repayments can put undue strain on your budget.
It is important to give your self a margin and not borrow up to the hilt. Would you still be able to pay if your income reduced or ceased?
Do I have peace?
The Bible talks about peace ruling in our hearts in Colossians. It is important that we honour God with our decisions and plans and seek His wisdom. He cares about everything that concerns us and that includes our finances. When we base our decisions on His word we can find peace. Don’t act speedily, take time and listen to what God wants to speak to you. If you are married, it is important to share decision making with your spouse so you can come into agreement and be in unity.
“Let the peace of God rule in your hearts, since as members of one body you were called to peace, and be thankful.” Col.3:15
Does it make economic sense?
Will the value of the purchase increase over time?
Is the return greater than the cost? Will the item appreciate or produce income?
A home mortgage might meet this requirement as, over time a house usually, but not always, appreciates. By investing a reasonable deposit, you can expect to sell the home for at least as much as the mortgage. Another requirement means buying an affordable house – one with a monthly repayment that does not put strain on your budget. Make sure you could continue to repay your mortgage even if the interest rates increased by two, or even three per cent and that you have the necessary savings for unexpected cash requirements like repairs or maintenance.
How long should it take to repay? That is between you and God. Make sure that if you move you do not extend the final date that you make that last mortgage payment. If you can, use relocation as an opportunity to bring forward that date by taking a mortgage with a shorter term than that remaining on the previous one. This reduces the amount you have to pay in the end.
While students may receive some financial assistance from parents there is no doubt that student debt is a problem, with many people not completing their repayments until they are in their forties. These days, student debt is almost inevitable for those pursuing a degree, and although in some ways it is unique (you are unlikely to secure any other kind of loan at such a low rate of interest or with the repayments so directly linked to earnings) nevertheless it is still a burden of debt on people at the start of their adult lives. There is also a danger that it might lead to a sense that debt cannot be avoided with a consequential culture of debt that focuses on stretching to borrow the maximum that can is affordable. Excessive student debt may limit your freedom.
Can I handle it?
There is no doubt that being debt free brings freedom into your life and enables you to be more available to God and to use your money in order to build his Kingdom. However, if you are not at this point and decide to borrow money, it is important to know that it will not bring you a psychological burden which will cause anxiety. Some people are able to handle risk more comfortably than others, so wisdom is needed to know what you are able to take on regarding financial decisions.
“Everything is permissible for me but not everything is beneficial. I will not be mastered by anything.” 1 Corinthians 6:12
“Consolidation loans are tempting because you are able to pay off your creditors with the loan and then make one payment instead of several. However you are likely to pay more interest in the long term and more than 50 per cent of those who consolidate their loans increase their debts with the ‘spare’ cash. Thus these loans only treat the “symptoms” for a while but not the problem.”
“Just as the rich rule the poor, so the borrower is servant to the lender.” Proverbs 22:7 TLB