If I’m going to talk about money, at some point I have to talk about debt. In America at least, debt is a way of life. The American government is trillions of dollars in debt, and that amount grows every day. Americans by the bucketloads take on debt to fund their college degrees, buy their homes, run their small businesses, and own their cars. Consumer debt in America is pandemic. You might say that debt is the norm, it is the culture, and people don’t think twice about taking it on. Sometimes, however, you can follow the culture to your own ruin.
The relationship of Scripture toward debt is complex partly because the word “debt” can mean more than one thing. “Debt” can refer to any situation in which someone borrows money. This is the broadest meaning of the term. According to this meaning, the person with a modest home mortgage that he has no trouble paying is in debt because he has signed a note to pay off the balance in the future.
The second meaning of “debt” refers to a situation in which people owe money that they cannot pay back. Occasionally, this sort of debt comes from extraordinary circumstances beyond one’s control — enormous medical bills or loss of work due to injury — but in America, at least, these sorts of situations are the minority. In most instances in America, the debtor willingly took on debt that he could not sustain over time – buying too much home or taking on hefty credit card debt.
Scripture stands squarely against this second type of debt when it arises because the debtor chose it. The debtor has foolishly and willingly borrowed money or signed a contract that strains his finances to the point that he eventually cannot pay. That type of debt is sin (Ps 37:21). It can be a type of stealing, for the debtor has taken money from others but does not pay it back. It is often a violation of one’s word, for the debtor has signed a contract that says he will pay according to certain terms but later reneges on what he signed. It reveals a heart that is misplaced, for where your treasure is, there your heart will be also, and this kind of debt shows that the heart’s treasure is at least skewed toward earth instead of toward Christ. The heart of the debtor is not content with what he has. So he borrows to get what he wants or he commits money that he can’t pay. That is sin.
Scripture is more nuanced on the first meaning of debt (borrowing money broadly speaking). On the one hand:
1. Scripture contains no clear prohibition of all loans. Even Romans 13:8 that says to “owe no one anything, except to love each other” does not necessarily restrict all forms of loans, for it comes immediately after 13:7, which says to “pay to all what is owed to them: taxes to whom taxes are owed, revenue to whom revenue is owed.” If you borrow money and sign a contract to pay it back, do you owe the full balance or merely the amount the contract says you owe this month? The answer, of course is “yes.” Thus, does 13:7 tell us to pay our obligations faithfully or to pay off everything immediately? My point isn’t to debate what Romans 13 says about loans, but to say that whatever it says is debatable. I would not consider it a clear prohibition of all loans. If, however, someone read this verse and took it to mean they could not take out any loan ever, I would tell him to follow his conscience on the matter.
2. The Old Testament allows for loans to the foreigner (Dt 23:20).
3. Jesus, in the parable of the talents, scolds the wicked servant because he did not at least put his one talent into the bank where it could earn interest (Matt 25:26-7). I understand this is a parable and not straightforward teaching. I also understand that Jesus is not advising the wicked servant to take out a loan. But within the parable, this is at least an endorsement of banks and what they do, and the main thing they do is loan money.
On the other hand:
1. The Old Testament prohibits charging interest on loans for your brother (Dt 23:19-20) and for the poor (Ex 22:25; Lev 25:35-8). Even if charging interest on loans may be Biblically allowable in some cases, it is not allowable to take advantage of the poor in this way or to put debt between brothers.
2. “The borrower is the slave of the lender” (Pr 22:7). Even if borrowing money may be legal, it is not normally wise.
3. Romans 13:8 may not prohibit all loans, but it does push in the direction of avoiding debt in general and of getting out of it if you are in it.
Thus, Scripture may allow for certain types of loans to certain people and for charging reasonable interest on those loans, but the overall thrust of Scripture is to lend freely and to not be in debt to your brother.
It may be true that the first meaning of debt (borrowing money broadly) can be legitimate, but it is also true that this first meaning is what leads to the second meaning (borrowing money that you can’t pay back), and when borrowing money reaches the point where you can’t pay it back, you’ve crossed a line.
Based on the discussion above, I do not believe Scripture lays down a law against all debt, but my counsel would be to avoid debt as much as possible. Avoid car payments and student loans. Avoid credit card charges that you can’t pay off at the end of the month. Don’t finance furniture or a new kitchen. If you cannot afford to purchase something new or big, live with what you have. If you must purchase an item, purchase something used and less expensive and pay cash instead of borrowing. Do everything in your power to avoid debt if you can.
Sometimes you can’t. A home might be an example. You must live somewhere. That’s not an option. And wherever you live will likely involve debt. In most instances, your only options are to rent or buy, and both options involve debt of some kind. When you rent, you sign a lease that obligates you to make monthly payments for usually a year. That is a form of debt. If you take out a mortgage for 15 years, you have one contract for 15 years. If you sign leases for 15 years, you have 15 contracts for 15 years. The mortgage is a bigger contract with a longer time to pay it, but no matter how you divide it up, you must take on debt if you want to live somewhere.
Given this reality, if you can afford a reasonable home mortgage, go ahead and get one for the following reasons: 1) In the long term, owning is cheaper than renting. 2) The lease is perpetual. The mortgage is not. Thus, the mortgage actually gives you an opportunity to end debt for housing. 3) With a mortgage, you own the home. This gives you a resource you can use to pay your debt if something wild happens. If you become unable to pay your mortgage, you can always sell your home, pay what you owe, and go rent something cheaper. I understand there are times when people may be upside down on their mortgages and also unable to pay, but those instances are much rarer than people being delinquent on their rent. In general, the home itself is a resource that provides equity against defaulting on your debt.
Do not, however, get a mortgage if you cannot afford one. A mortgage may be cheaper in the long run, but it is considerably more expensive up front. And if you do get a mortgage, get only what you can pay for. Don’t buy a $500,000 house if you can afford only a $250,000 house. And once you have a mortgage, pay it off as quickly as you can without jeopardizing your ability to support your family and pay your other obligations.
Thus, your main thrust concerning all forms of debt should be to avoid it as much as possible. Debt is too often a financial, emotional, and spiritual shackle.
All things may be lawful, but not all things are expedient.
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