Ten Most Asked Questions About Borrowing
By Crown Financial Ministries
Borrowing is an ancient concept that is discussed thoroughly in the Bible, as are many other financial principles. In today’s society we are drowning in debt—both public and private—and we consider it normal and God-directed to borrow in order to obtain the things we feel are needed. What does God’s Word say about borrowing? Is it permitted? If so, under what conditions can we borrow? Can families in America function effectively without borrowing?
Ten questions concerning borrowing
The following are 10 questions most often asked concerning borrowing.
- What does the Bible say about borrowing? Scripture very clearly says that neither borrowing nor lending is prohibited, but there are firm guidelines. Borrowing is always discussed in a negative light in the Bible because it is not God’s best. If a person does borrow, the Scriptures are very clear that the money borrowed must be paid back.
- Is overdraft protection a good idea? Overdraft protection is not a good idea. It encourages people not to keep their checking accounts balanced, and it encourages the use of credit when discipline in spending should be used.
- Does the Bible prohibit a Christian from borrowing money from a non-Christian? God’s Word simply says that whatever is borrowed must be repaid. It doesn’t specify whether a believer should borrow from another believer or from a nonbeliever. It makes no difference as far as repayment is concerned.
- How can low-income families avoid borrowing? One of the greatest dangers for low-income families is the use of consumer credit. There is only one way for low-income families to avoid becoming overwhelmed with debt: do not borrow. That means that families have to spend frugally and discipline themselves to stay on strict budgets. For low-income families, it is probably best not to use credit cards.
- Should people borrow to do the work of the Lord? If a person knowingly violates biblical principles, it’s wrong, no matter how noble the purpose. It is unlikely that God would direct anyone to violate His Word to accomplish His work. Since borrowing is not God’s best for His people, why would He endorse borrowing in order for His work to be accomplished?
- Is it acceptable for businesses to borrow? It is not any more essential for a business to borrow money than for an individual. God’s Word does not differentiate between business borrowing and personal borrowing. That doesn’t mean that a business is prohibited from borrowing. It simply means that when a business borrows it assumes a liability and the associated risks, and the money has to be paid back per the agreed-to conditions. In essence, it eliminates God’s provision for the business and places that provision in the hands of the lenders.
- Is a lease better than a loan? A lease is basically no different than a loan. When you sign a lease, it’s a contingent liability and an obligation to pay. However, the economics of a lease are usually worse than a conventional loan and may actually cost more than a loan in the long run.
- Should home mortgages be refinanced if you can get a better interest rate? If you plan to stay in the home for five years or longer, can lower your fixed-interest rate by 2 percent or more than your existing rate, and do not have to roll the refinancing and closing fees into the new loan, you might want to consider refinancing. However, if with your lower monthly payment you cannot pay off the refinancing and closing fees within three years, you might want to rethink your decision to refinance.
- Should I borrow on the equity in my home in order to invest? No matter where funds are invested, they can be lost if there is an economic turndown. The debt on the house will continue regardless of economic conditions. The goal of every homeowner should be to have a debt-free home, but not so that it can be used as collateral against which to borrow. Borrowing against equity in your home to invest is one of the worst financial decisions that can be made.
- Is it wise to get a consolidation loan? Consolidation loans are tempting because creditors can be paid off and you only have one monthly payment, rather than several. A consolidation loan may treat the symptoms for a while, but unless a disciplined and diligent lifestyle is adopted even greater bondage can be created because past habits have not been corrected. Consolidation loans should never be the first step in resolving a debt problem; budgeting and discipline should be.
Although borrowing is not forbidden in God’s Word, it is not encouraged because it is not God’s best for His people. His desire is for us to rely on His provision for our needs, not to rely on lenders for that provision.
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