Principles of Debt
- Debt is not in and of itself a sin (“adiaphorous”).
- The motivation of the heart is important “Debt prevents God from providing in miraculous ways.”
- Following Biblical Wisdom is key.
- Personal economic impact (today and tomorrow) “All debt reduces your standard of living because it reduces the amount of available income to live on.”
- Math is God’s idea. To the extent that we violate mathematical principles, we violate the will of God.
“Good” debt and “bad” debt can be subjective. Therefore, it might be more helpful to discuss this in terms of “good borrower” and “bad borrower”.
Prov. 22:7 “The rich rule over the poor, and the borrower is servant to the lender.” (Proverbs 22:7, NIV84)
- You are now under the financial, legal, and moral obligation of someone else.
Lev. 25:35-37 – “‘If one of your countrymen becomes poor and is unable to support himself among you, help him as you would an alien or a temporary resident, so he can continue to live among you. Do not take interest of any kind from him, but fear your God, so that your countryman may continue to live among you. You must not lend him money at interest or sell him food at a profit.” (Leviticus 25:35–37, NIV84)
- There is actually a command to lend money, but with strong boundaries and guidelines. Therefore, debt cannot be morally wrong in-and-of itself
What makes ‘bad’ debt or a ‘bad borrower’?
- Any predatory lending practices. Loans at very high interest rates that specifically target the poor. (i.e. payday loans, title loans…)
- Credit Cards & Cash Advances can be predatory in that it seems anyone can get one with very little credit.
- Borrowing from Retirement. Taking your future retirement savings and using it to meet today’s needs.
- Borrowing for consumption. Going into debt and ‘consuming’ it is unwise. Don’t borrow on consumption.
- Borrowing for investing. Don’t fall into the ‘get rich quick’ schemes that the world seems to offer.
- Borrowing for education. Your loans must make economic sense. Not all student loan debt is ‘bad’. However, don’t borrow a high amount if you will only make a small amount.
What makes ‘good debt’ or a ‘good borrower’?
- Borrowing for something that appreciates in value. (i.e. not borrowing for consumption)
- Borrowing for a house to live in and enjoy (Again, your loans must make economic sense)
- Borrowing to start a business. Be cautious when working with different lender services. Do your research and move forward carefully.
It all comes down to the heart of the borrower.
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