Saturday, May 07, 2005

Is Borrowing Unscriptural?

There are some who teach this. And it may seem that I am making the same case. However, that isn't entirely the case. I don't believe the scriptures prohibit borrowing all together. It is foolish in most cases, but there are times when it is acceptable.

It is important to realize that it can result in the destruction of a marriage, ruined lives, ruined businesses, and an undermined economy. When we borrow we assume that the future is predictable, and that we will continue to have income to service the debt. In James 4:13, this is identified as a characteristic of worldliness. It shows a lack of trust in God.

The basic principles to follow when you must borrow are:
1. Avoid it whenever possible. We operate under the assumption today that it is necessary to buy a car or a home, however, in earlier generations these items were paid for with cash. It is a recent development that everyone assumes they will borrow to buy these things.

2. Avoid signing personal guarantees. Proverbs 6:1-3 tells us this. Even if it is for a close friend, or for your business, it is as if you borrowed the money yourself, and you'd better be prepared to pay it.

3. Avoid taking out long term loans. Mortgage loans are the most common. What is the likelihood something will go wrong and render you unable to meet your payment schedule? With business cycles lasting about 10 years, it is inevitable. When you do borrow, it is wise to pay it off quickly.

4. Always have collateral that can be used to satisfy the loan. This is so that if things do go bad for you, you can always pay the loan by selling the collateral. It is difficult to do that with a home, because it uproots your family, and is the reason you must pay it off as fast as possible. Your car depreciates in value, so your loan had better be much less than the purchase price. You will need to be ready at any time to sell the items quickly. These two items don't sell well in bad economic times, so you must consider these kinds of loans very carefully.

The bottom line is that borrowing was originally an act of charity. It was done without interest, unless you were lending to a foreigner, and it was shameful to have needed a loan. It is intended for the poor. Today borrowing is a way of getting what we want before we can afford it. It gives us a false sense of wealth, and it drives up the prices of items that are typically purchased with loans.

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