Record low interest rates have brought on a flurry of home refinancing and a big temptation. Refinancing your home provides the opportunity to take cash out increasing the size of the loan. It’s time for a refresher course on biblical borrowing.
Record low interest rates have brought on a flurry of home refinancing and with it, a very big temptation. Refinancing your home provides the opportunity to take cash out of your home while increasing the size of your loan. Rob West takes you through a refresher course on biblical borrowing.
You’ve probably heard ads for mortgage refinancing that offer the option of taking money out at the closing table. They might lead you to believe that the equity in your home is money that belongs to you. But until you actually sell your home, any cash you receive from a home equity loan or cash-out refinance is just another loan.
The money isn’t yours. You’re just renting it for a while, and there is always a cost for that borrowing.
While the Bible never calls borrowing a sin, it also never speaks of it in a positive sense.
So when is borrowing okay? Simply put, it’s only okay to borrow if it makes financial sense to do so. For example, a business owner might borrow to expand the operation and increase revenue, but only after due diligence shows it will increase revenue or lower overhead. In other words, the economic return on the amount borrowed should be greater than the cost.
Do not presume on the future
Borrowing should follow the biblical principle of not “presuming on the future.” You should only borrow when you have a guaranteed way to pay it back. That means you’re putting something up as collateral in case of default.
What about student loans? Odds are, you have no collateral to borrow against, but you likely have a reasonable expectation of greater earning potential to enable you to repay the loan.
However, if you’re borrowing for education, you have to choose a major that gives you marketable skills, and you have to finish your studies and graduate. Otherwise you’ll have a lot of trouble paying back those student loans.
Avoid debt whenever possible
The Bible makes it clear that we should make every effort to avoid debt. Proverbs 22:7 says, “The rich rule over the poor, and the borrower becomes slave to the lender.”
The less you owe, the more freedom you have to answer the Lord’s calling for your life and reinvest in kingdom purposes.
Pay it off as quickly as possible
Another biblical principle about borrowing might be described as, “the shorter, the better.” Deuteronomy 15 teaches that debts in ancient times weren’t to exceed 7 years. If you borrow, pay your debts off as quickly as possible.
Don't Cosign
Another biblical teaching about borrowing is to avoid co-signing for someone else’s loan, which the bible calls “surety.” Proverbs 22 says, “Be not one of those who give pledges, who put up security for debts. If you have nothing with which to pay, why should your bed be taken from under you?”
Always repay your debts
And that leads us to our last biblical teaching on borrowing. God commands each of us to “Pay what you owe.” Ecclesiastes 5 says, “It is better that you should not vow than that you should vow and not fulfill it.” And Proverbs 3 says, “Do not withhold good from those to whom it is due, when it is in your power to do it.”
On this program, Rob also answers these listener questions:
What is the best way to make out a will?
Why does the United States seem more reluctant than some other nations to embrace cryptocurrencies?
How should a single parent balance retirement savings with paying down debt?
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