by Bruce on June 22, 2009
In order to wisely process upcoming posts, consider the following definitions:
Bad Debt: when one pays all the principal and all the interest, outside of a tax favored environment. This applies to most consumer debt.
Acceptable Debt: when one pays all the principal and part of the interest, inside of a tax favored environment. I am not suggesting that any debt that meets this criteria is acceptable…simply that it might qualify as acceptable. An example would be buying a house and paying it off fast. Rapid payoff minimizes interest paid. And the interest paid is tax deductible (in America).
Good Debt: when one can get someone else to pay off all the principle and interest for you. I can think of three examples. The first is when you purchase a rental property and the monthly rent recieved more than covers the payment. In effect, they are paying off the debt for you. The second is tied to those who travel by car for their profession. Some companies offer a generous mileage reimbursement package that more than covers the monthly payment and related automobile expenses. The third is not related to money but is far more important. The Bible teaches that all people have a sin debt that must be paid in full. The good news is that Jesus died to pay off your sin debt for you. Amazing! This is the best news I have ever heard! For more information, see below.
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by admin on June 22, 2009
In the Bible, God has a lot to say about debt. The following 3 points give a general summary:
- The Bible Does Not Prohibit Debt
- If You Have Debt, Do Everything Humanly Possible To Pay It Off
- Pay Off Debt Fast
First: The Bible Does Not Prohibit Debt.
Let’s get real. Though the Bible does not prohibit debt, it
never encourages it either. It clearly warns of the dangers of
debt. One example comes from Proverbs 22:7; the borrower is a slave to the lender.
If you are a slave, you do all the work and the Master keeps all the money. If you are in debt, you do all the work and Mastercard keeps all the money. There is a connection between being a slave and being in debt. That connection: bondage!
It is not that God is against borrowing. He is against
bondage. Since borrowing often leads to bondage, God gives ample
warning.
Some suggest that Romans 13:8 prohibits debt. In the King James Version, it reads, Owe no man anything, but to love one another: for he that loveth another hath fulfilled the law.
The New International Version translates this verse differently: Let
no debt remain outstanding, except the continuing debt to love one
another, for he who loves his fellowman has fulfilled the law.
After much study, prayerful consideration, and interviewing great
men and women of faith, I am convinced that Romans 13:8 is teaching to faithfully pay off the debts you have, which leads us to the next point.
Second: If You Have Debt, Do Everything Humanly Possible To Pay It Off
In Psalm 37:21 we read: The wicked borrow and do not repay.
This is referring to those who do not follow God and his ways.
God wants his followers to step up to the plate and take the lead…set
the example. Pay back creditors on time…even early. The
norm in God’s economy is for “Christ followers” enjoying the best
credit scores in the world!
Third: Pay Off Debt Fast
In the Bible there are several examples of debt payoff. Each emphasizes rapid debt elimination.
- In Deuteronomy 15:1 we discover the longest term allowed for debt
payoff in the Bible was 7 years. Though I am not legalistic about
this, it is clear that God never intended his followers to live in an environment of long term oppressive debt.
- In Proverbs 6:1-5 we discover that escaping from debt should look
like “a gazelle escaping from the hunter.” This emphasizes rapid escape. The idea is to take immediate and swift action until free from debt danger.
- In 2 Kings 4:1-7 we read of a single mom who was in debt. After receiving counsel from Elisha, she took action and was free from debt in approximately 30 days!
Rapid debt payoff is foreign to many in the modern day world.
It was not long ago that the longest loan term available for an
automobile loan was 4 years. I am aware of 8 year car loans
currently.
The longest term on a home loan in the U.S. used to be 30
years. One can now receive a 50 year loan for a home in
America. This is nothing compared to the 90 year mortgage that is
available in Japan. This is often referred to as a “Third
Generation Loan”, as that is the generation that finally pays off the
loan.
We must recognize that the financial direction we receive from the Word is often different from that of the World. One must choose which path to follow.
Regardless of the culture or the times, the above guidelines seem to be good boundaries to help make wise financial decisions.
In coming posts, I will be address the subject: “When Debt Makes
Sense”. These articles will offer some scenarios to help
determine the difference between “Good Debt” and “Bad Debt.”
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