Good Debt. Bad Debt.
I bet you’ve heard about this.
Some call it Consumer vs. Leverage debt.
Some financial gurus will say debt is foolish the other one an important wealth-building tool.
How can we know which expert to trust?
That’s just the thing… even experts, when learning a new statistic or trend, can change their minds.
No expert has all the information, knowledge, or wisdom.
That is why I so heavily rely on the Bible for all financial principles and wisdom.
I truly believe that God is the ONLY EXPERT who fully understands the economy and human nature and has the full knowledge about all things financial (including our unique financial lives!).
We should always run “expert” claims against what The Lord has revealed in Scripture (studying it thoroughly and being open to being wrong!) and never dismiss what the Bible shows us (thinking we know more than God?!)
So without Further Ado- What DOES the Scripture say about good vs bad debt?
Debt Is Debt Is
Debt Is Debt Is
The Bible never takes into consideration why (which is the leverage/consumer reasoning) we have taken on the debt …only that we owe a creditor, or a borrower owes us.
Creditors always have the upper hand. They have the right to be repaid in full no matter our circumstances.
Borrowers are at risk - they have no ability to see future events and despite what may happen, they are obligated to repay.
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And others said, “We have had to borrow money on our fields and vineyards to pay our taxes. 5 We belong to the same family as those who are wealthy, and our children are just like theirs. Yet we must sell our children into slavery just to get enough money to live. We have already sold some of our daughters, and we are helpless to do anything about it, for our fields and vineyards are already mortgaged to others.”
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7 Just as the rich rule the poor,
so the borrower is servant to the lender.
26 Don’t agree to guarantee another person’s debt
or put up security for someone else.
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“Woe to him who heaps up what is not his own—
for how long?—
and loads himself with pledges!”
Will not your debtors suddenly arise,
and those awake who will make you tremble?
Then you will be spoil for them.
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One day the widow of a member of the group of prophets came to Elisha and cried out, “My husband who served you is dead, and you know how he feared the Lord. But now a creditor has come, threatening to take my two sons as slaves.”
2 “What can I do to help you?” Elisha asked. “Tell me, what do you have in the house?”
“Nothing at all, except a flask of olive oil,” she replied.
3 And Elisha said, “Borrow as many empty jars as you can from your friends and neighbors. 4 Then go into your house with your sons and shut the door behind you. Pour olive oil from your flask into the jars, setting each one aside when it is filled.”
5 So she did as she was told. Her sons kept bringing jars to her, and she filled one after another. 6 Soon every container was full to the brim!
“Bring me another jar,” she said to one of her sons.
“There aren’t any more!” he told her. And then the olive oil stopped flowing.
7 When she told the man of God what had happened, he said to her, “Now sell the olive oil and pay your debts, and you and your sons can live on what is left over.”
This is a straightforward concept so I won’t spend too much time here.
The next concept requires more thought so let’s dig into that.
A large number of passages about debt are dedicated to teaching the Israelite people how to lend to each other in a way that honors the Lord —setting rules (laying down principles) for how to be a creditor that pleases the lord and Honors man.
A righteous creditor
Takes no advantage of the poor
Doesn't charge interest to their brother
Is quick to forgive debt
An unrighteous creditor
Gets rich off the poor
Charge is excessive interest
Is slow to forgive
Will take your livelihood to get what is rightfully his.
Context reminder:Most of these passages were writen under the Old covenant to the Israelites- a people set apart to Honor the Lord and bring about our Messiah. The rules/commands don’t apply to us today - we’re looking at Gods character, his desire for His people, and the principles we see him instruct out of his perfect knowledge FOR their good and his glory.-
1 At the end of every seventh year you must cancel the debts of everyone who owes you money.
3 This release from debt, however, applies only to your fellow Israelites—not to the foreigners living among you.
9 Do not be mean-spirited and refuse someone a loan because the year for canceling debts is close at hand. If you refuse to make the loan and the needy person cries out to the Lord, you will be considered guilty of sin.
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“True justice must be given to foreigners living among you and to orphans, and you must never accept a widow’s garment as security for her debt.
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“We also promise that if the people of the land should bring any merchandise or grain to be sold on the Sabbath or on any other holy day, we will refuse to buy it. Every seventh year we will let our land rest, and we will cancel all debts owed to us.
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“If you lend money to any of my people who are in need, do not charge interest as a money lender would.
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“If one of your fellow Israelites falls into poverty and cannot support himself, support him as you would a foreigner or a temporary resident and allow him to live with you. 36 Do not charge interest or make a profit at his expense. Instead, show your fear of God by letting him live with you as your relative. 37 Remember, do not charge interest on money you lend him or make a profit on food you sell him.
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And that son does all the evil things his father would never do—…oppresses the poor and helpless, steals from debtors by refusing to let them redeem their security, … and lends money at excessive interest. Should such a sinful person live? No! He must die and must take full blame.
So what do we do with this?
We acknowledge that Debt is indeed a part of life.
It’s not a sin. Nor is everyone who has debt a fool.
Debt is simply a risk taken (in the same way that having insurance alleviates us from certain risks, NOT having debt alleviates us from certain risks.)
When evaluating whether to take on debt we need to ask a couple of questions:
Is it a risk worth taking?
Is there a “righteous creditor” I can turn to? (offers low interest, forgiveness options, …)
Credit cards have outrageous interest rates among MANY other practices I would call “clever” if I’m being nice.
Pay Day loans, and “buy now-pay Later” options take advantage of the poor under the disguise of solving a problem (when they are actually making it worse).
Home Mortgages and Car loans generally have lower interest rates and missed payment options… but remember ALL debt holds risk AND, when interest in is play it ALWAYS costs more money -which robs you of the ability to use that money to build wealth.
