The dictionary defines debt as “money that a person is obligated to pay to another.” Debt includes money owed to credit card companies; the home mortgage; car loans, bank loans; money borrowed from relatives; past-due bills and anything you’ve co-signed for.
Scripture does not call debt a sin, but it does strongly discourage us from being in debt. “The rich rule over the poor, and the borrower is the slave of the lender.” (Proverbs 22:7) When we are in debt, we are enslaved to the lender. If you don’t think your debt makes you a slave, try missing a few payments and see what happens. The deeper in debt we are, the more like slaves we become. Debt means we have no freedom to decide where to spend our money because the money we earn is obligated to meet our debt payments.
When we get into debt, we’re assuming that we will earn enough in the future to repay it. But can we really assume such a thing? We plan for our jobs to continue or our investments to be profitable, but the Bible strongly cautions us against such presumption: “You who say, ‘Today or tomorrow we shall go into such and such a town, spend a year there doing business, and make a profit’—you have no idea what your life will be like tomorrow … Instead you should say, ‘If the Lord wills it, we shall live to do this or that.’” (James 4:13-15)
Let’s look at the dollars and cents of the debt payments for a typical family. If the family has $5,560 in credit card debt at 18% interest rate, and they are paying the interest only, with no payment on the principle balance, the interest payments alone cost $1,000/year EVERY YEAR! And using the minimum payment method, it will take them almost 8 years to pay off the credit card, if they do not charge any more to it.
Paying interest is money that’s just being thrown away. In the meantime, whatever was purchased using the credit card is probably lost, used up or no longer valid by the time the credit card is paid in full. Read this verse from Sirach 20:11: “A man may buy much for little, but pay for it seven times over.” Many people raise their lifestyle through debt, only to discover that the burden of debt controls their lifestyle.
We get so caught up in what we don’t have and what we want, that maybe the best thing is to not have so much. Nothing in our secular culture encourages us to be content with what we already have. The American media is constantly barraging us with messages to make us discontent, otherwise we won’t buy anything. It’s a proven fact that the more TV you watch or the more you surf the web, the more you will buy. The more you look at catalogs and magazines, the more you buy. And the more you shop the more you spend. And if you use that little plastic card when you shop, it is very likely you will spend 37% more than if you paid cash.
If you have a $50 budget for whatever you need to buy and if all you have is $50 cash in your wallet, it limits your spending–you can’t spend more than $50 or you’ll be in trouble. But with a credit card, it’s no problem to go over budget. There is no incentive to stick to a budget when you are using credit cards.
And cosigning is every bit as hazardous to your financial health as your own debt. When a friend or relative tries to get a loan and their credit is not good, the lending institution will require a cosigner. When you cosign a loan you are agreeing to pay the loan if the person you cosigned for does not pay. You are legally responsible for the debt. By cosigning, you have promised to pay off the entire loan if the borrower does not pay.
Statistically, cosigners usually end up paying. Proverbs 17:18 says “Senseless is the man who gives his hand in pledge and who becomes surety for his neighbor.” So the Bible is telling us that we have no sense if we co-sign. Rather than the original borrower paying their own loan, the statistics indicate that the cosigner will most likely end up paying for the loan.
Here’s what also happens. When you cosign a loan it gets listed on your credit report. Therefore if the borrower pays 30 days late, you’ll see it on your credit report. You’ll get a negative hit against your credit score for their late payment. One thing most people do not consider when they are co-signing is that if the borrower defaults, your credit could be affected for at least seven years.
So before cosigning, think twice. If you’re considering cosigning, meditate on this verse from Sirach 29:17 “Going surety has ruined many who were prosperous and tossed them about like waves of the sea.” If the original borrower defaults you will be paying for something you don’t own, the relationship with the other person has probably been ruined and your credit has been wrecked through a situation you could not control.
Doesn’t really sound like a very good deal, does it?
We all face financial challenges at some point in our lives and just paying the day-to-day bills can be overwhelming. It seems like the only way to survive financially is to use credit. Sometimes we dream and pray to win the lottery as an answer to financial challenges. But how often do we pray to God for wisdom in handling our finances on a daily basis?
We need to get into the habit of going to our knees any time we are facing challenges, even as it applies to our finances.