Ep. 073 - The Hidden Danger of High-Interest Debt: A Biblical Perspective on Borrowing

Episode Transcript

Austin
Any time stewards of God's resources choose to use debt, they must do so prayerfully. We take our purchases before God and ask, is this something I need or something I want? How would you like to provide for me? When Christians get caught in high interest debt, though, how are they to respond? Today we will talk about the dangers of high interest finance.
So, Spencer, today we get to talk about a super fun topic. What happens when Christians are faced with the possibility that they may need to take out a loan? And what we would put a caveat here on, we'll talk about the biblical principles surrounding that. But what do we want to think about in particular with high interest financing?
Where do we categorize that?

Spencer
Well, we look at it and throughout Scripture, looking at it in the Old Testament, seeing New Testament principles, it's something to be avoided. It's something to be avoided on both sides. And we'll get into the scriptural text here. But the Lord clearly says that Israel doesn't need to be lending at high rates. That's usury. The Lord also cautions them against borrowing at high rates, borrowing from other nations.
So I think we need to just to look at it and say biblically, this is something that we need to avoid at almost all costs. There are nuances of debt overall that we can look at in our American system with mortgages that we'll talk about with some options for very low interest financing, maybe for a period of time that we'll look at.
But these high interest financing options, we've just got to find a different way.

Austin
Yeah, absolutely. And so as we look at interest and high interest in this idea of usury, the reality is as we look through Scripture, God is always unfavorably looking at those who are unjust, whether it's unjust to a brother and sister in the faith or unjust to someone who is in need. And so we see this in Exodus 22:25, Leviticus 25:37, Nehemiah 5:10, Ezekiel 18:8.
Kind of throughout Scripture, if you are taking high interest from anybody so that you can earn a profit, God does not look favorably on that. And this isn't like 2 to 3%. This is that 15, 20%. Like you're really keeping the poor poor by charging them exorbitant interest rates. So God does not like that. And if God doesn't like that, we should really be cautious if we're saying, I want to enter this type of an agreement, either as a borrower, but especially not as a lender.
And the reality here is God allowed for lending to other nations. So if Israel, especially in the Old Testament, I think we have to look at the Old Testament, particularly as God's Word to a very specific people at a very specific time. It is also to a nation-state. Israel was a nation-state. So some of the laws that are written in the Levitical law and some of the practices that are performed are practices to maintain a nation-state.
A very specific one that God had his hands on. But if we look at Deuteronomy 15:6 or 28:12, He allowed for lending to those places, but not necessarily borrowing from them, because God knew that if you borrowed from a place like Persia or Assyria or Babylon, they might be taking advantage of you. So let's really be cautious as we are interacting with places that don't have your interest at heart.
And I think though this was to a specific nation state at a specific time in history, I think in a lot of ways we can look at it in modernity as well and say, okay, does this bank or this credit card provider or this auto loan provider have my best interests at heart? No. I hate to tell you listener but they do not.
They care about their bottom line. They care about generating a profit. And so I think as we look at this we have to kind of take that into consideration. God, we are managers of God's money. He places all these resources in our hands and we’re to be stewards of that, stewarding them as He would, not necessarily as we would.
And so one of the core principles that we want to come back to is Proverbs 22:7 and we'll read this one. It says, the rich rules over the poor. The borrower is the slave of the lender. And so the reality here is whether it's a short term loan, whether it's a long term loan, whether it's a 0% loan for a year, we have to be really cognizant that when we enter those loans that we are slaves to the lender.
We have made a promise that they will give us money and over time we will pay them back. But until I pay them back, I am enslaved to that loan. Whether it's $2, $200, $2,000, I'm still tied to that loan until I pay it back. So we enter it with caution knowing that these are God's resources that we are putting in play.

Spencer
Well, and I think that's important to say, because even if it's a 0% interest loan, what our counsel would be is, okay, that's a great interest rate. Let's have these resources sitting over here in the money market account. If you take out a zero interest rate loan to, you know, finance your new home, your new, something new with a home, you know, a roof or a, HVAC unit or something like that.
Let's say you have to pay $20,000. You get it for zero upfront. Well, you take the 20,000 that you would have had to pay, put it in a high, interest money market account that pays you 4 or 5%. Ideally. And now you've gained $1,000 of interest by the time you have to pay that off, but not 0%.
Take the $20,000 and figure out where the funds come later on. Because they're probably going to come from a high interest loan if something doesn't go right. So presuming that you're going to be able to maintain your current level of cash flow or other bad things won't happen, we are presuming on the future always, even in a 0% interest loan environment.
So I think that's the thing that's hard that, you know, you come back to and you could say, okay, these are low interest rates. Yes, but does it justify taking a good or service into the future, that you would have had in the future and bringing it into now? So that's something that I because there's always a reason.
There's always a reason why people move from a place of paying off their credit card monthly to not being able to pay off their credit card monthly. And that typically is something happens with work or something happens unexpected and they don't have enough margin, you know, over here. So one of the first things that we want to do is say, okay, we need to build in margin into life.
And then we need to make sure that even if we take out that loan at 0% or whatever it might be, if it's something that's outside of a mortgage, we need to be able to have those funds immediately prepared to pay it off.

Austin
Right. And I think one of the tricks, even there with a 0% mortgage is look at the contractual agreements. If you're supposed to pay it off by, let's say, February of 2027 and you missed the payment by a month, or you paid out pay it off on time, but it's on that very last month or whatever it is.
There may be a gotcha in there where if it's not paid off before, then you accrue all the interest. So there's just all sorts of things where again, you are entering a contractual agreement with a third party, and that contractual agreement may have, they still have an interest to bear that they want that interest. They don't want to give you that 0% loan, they want to make money on it.
And so there may be some things in there. So this is where we would say, again with caution, go into all lending eyes wide open.

Spencer
Well, and even for car loans because some dealers will run some kind of a promotion where it's, you know, 2% rate or a 0% rate or whatever. What we would always come back to is try to negotiate down the price, rather than take advantage of that financing. Now, sometimes they will say no, that's the that's as good an offer as
we’ll make. And you know, it's a 2% you know, financing. Take it or leave it. In that circumstance you probably take it. You know, and if the if the car cost $40,000 and, you know, you financed it over, you know, five years, $40,000 at 2%, why again, keep those funds on the sidelines, earning 4 or 5% risk free.
And then you'll have that spread between 4 and 2 That is in your favor. And so you'll get a little bit for it. But don't do that if you don't have to, you know, knock that price down from 40,000 to 38,000 or whatever it might be.

Austin
Absolutely. Okay. So let's deviate just a little bit and say we need to put a caveat here. And when we talk about high interest financing, some of the things that we see is we may look at a mortgage rate of 6 or 7% right now. Like, man, that is a really high interest rate. And it is. But we're back kind of in line with historical norms.
Humans, believe it or not, we are very short-sighted creatures. And so we look back to 2021, or 2020 and before, where mortgage rates may have been 2 to 3%. And we think, man, until it gets back down to that level, I'm not going to buy a home. The reality is we're kind of in line with historic averages as we sit today.
But what we really, rather than focusing on what we would say is maybe a more normative rate for a mortgage, we're looking at those high interest rates, and we want to see really what are the dangers therein. And these are the ones that are 9, 10% more, 20% for credit cards, if we're looking at that. And if we look at that as an example, Bankrate.com has a mortgage calculator, a loan calculator. If you have credit card at interest of about 20% and credit cards are averaging about 20% right now.
Sometimes it's going to be higher, maybe 25 or 30, depending on your credit history. But according to Bankrate.com, with that average 20% APR, if you only make the minimum payments on a $5,000 loan over the next 23 years, you're going to be paying off that loan, and over time, you're going to pay $7,000 of interest on that $5,000 loan.
So this is coming back to that; as a steward, what is the posture that I want to take? Is it a need or is it a want? I think oftentimes the danger of credit cards is that it's a well, I can swipe it now and I'm presuming upon the future when I will have those resources.
And then I'll pay it off then. But if something happens, if you lose your job, if you have no margin then you get into the situation where now you've got $5,000 of credit card balance that you can't pay at a 20% rate. If you're stuck paying that minimum balance, you are a slave for the next 23 years,
unless the Lord finds a way to help bring you out of that. So this is really the danger, especially for Christians is, as we look at high interest loans, they are incredibly punitive. And we come back again, God owns it all. We are stewards of what He has given, and so does taking out a credit card loan, a high interest loan,
does it honor the Lord of the universe as he would, Is this a way that he would manage those resources?

Spencer
Well, and even being, the credit card issue is, is one that I think there would be a general level of agreement. But even those high interest loans
for a vehicle, you know, even 9, 10%, which would be, you know, typical you're going to have, you know, vehicle loans oftentimes higher than mortgage rates. In that arena, it still presumes on the future. And so one would like to try to find a way, ANY way over the next couple of years to be able to build savings, to be able to purchase a vehicle and then purchase a used vehicle and then build from there.
Now reliability is an issue. There are folks in different kinds of circumstances and difficulties, but it's really, really hard to get excited about, you know, taking out funds for a vehicle with double digit interest rates, which is, you know, fairly typical of vehicles, you know, these days.

Austin
And I think as Christians in particular, as stewards, we count the cost, not just financially but we count it spiritually as well. If we have this high interest debt and as Proverbs says, that we are slaves to the lender. What kind of a spiritual toll does that take on our souls? The reality is, is it can be really high. If God calls us into the mission field or to take another job that may be lower paying because He wants us in a different role,
Are we so tied to the debts that we've taken on that we have to say no?

Spencer
Or even if we have a friend that is in need, we have less margin. We have less financial flexibility to be able to help out that friend. If we've taken on, you know, high interest financing. I think if we look at this, even having conversations about this and making it normative to say with our friends, yeah, I can't get that vehicle because I haven’t saved, you know, as much as I need to and I don't want to take on debt.
So often, we see people taking on debt to get that newer vehicle than they've really saved for, which means that not as much is being saved, not as much is available really for Kingdom purposes. Because, again, anytime we have a vehicle that's attached to a high interest loan, we've got a financial situation in that household where they're tied in a lot of different ways, whether it be the employment, whether it be other items in the budget that really can't be moved around.

Austin
Yeah. And you know, Spencer, anecdotally, as I think about this, we're going to shift over and talk about maybe ways that Christians can avoid and get out of high interest debt. And we've talked about the dangers of it in general. But, you know, I think about my kids, we're giving them an allowance. And we've talked about you can have money to be able to use it on yourself,
we expect you to give some. We expect you to save some. And then we want you to be able to give gifts to others. And so we give them kind of some parameters and they don't get a ton of money for allowance. But we started saying, hey, we will automatically put some money into your bank account for you.
If you want to increase that. That's great. But we've put another caveat on it for them of saying, if you want to take something out of your bank account, you need to wait 2 to 3 days, 2 to 3 weeks so that they aren't making impulsive buys so that when they're walking around target and they see that big pack of candy, we've also put parameters on that
they can't buy candy with their allowance.

Spencer
Thank goodness.

Austin
Thank goodness. And it does cause a consternation just about every time my kids bring an allowance to the store. But that's neither here nor there. But we've said, hey, if it is in your bank account, you need to take 2 or 3 days, sleep on it and then really think, is this something that I need and that I want to take money out of the bank account, or is it just something I want and, you know, even for my eight and ten year old, as they see their bank accounts growing because they're putting money in and they're saving, they're like, man, there's so much more I could do with this if I don't just every month
spend it. And for them, it's building in them some practices and rhythms that I think are universal as, as we save, it allows us, like you're saying, hey, we've got a friend that needs a car. Can I give $1,000, $5,000 to help them with a car? Well, if I'm tied to my debt payments, then I have no resources to be able to say, absolutely, I can do this.
It's in a very similar way with my kids of like when a need arises, if they've put aside money, well now they can give it, rather than just having spent it day after day after day when it comes out.

Spencer
Well, and it's interesting because, you know, you could make these decisions, you could put it into two different categories decisions made in the heat of a moment, you know, where you're kind of more of a consumer and you're trying to get something that you want.

Austin
Yeah.

Spencer
Or a more, maybe rational, open hearted decision, that would be more of a cool decision where you can kind of see all of the different options and more rationally evaluate them. The thing that's interesting, you know, as we look at our kids as well, is that the giving side of things, the open heartedness, the desire to help others; that is still in full force,
you know, when we think about the rational side of things, you know, the open heartedness. When you're over on the heat of, of a desire, you know, over here on this side of things, it's like everything else is shut down. You know, and so whether you're in a store, whether you're looking at something online that you might want to buy, or whether you've just seen a friend with the particular shoes that you might want or, you know, some kind of toy that they have.
It's so interesting because those decisions, they're so often made just very, very quickly. But if we can slow down that process, like you've talked about with all major spending decisions and say, okay, well, what is the best path here and can I evaluate other options? And, you know, even I would go so far as to say if there's not another option, we actually have to talk to a friend, you know, about this, someone who is wise.
Because there's so many different, situations, I think, that if we go to a pastor or an elder or, someone who is a really trusted and wise friend in our life, they can help point us in the direction of making a wise decision. And oftentimes that means, let's slow down on this. There may be a whole lot of different ways, and it may be over time that you can, make this purchase.
Or maybe there's other people that would be happy to help you, but not at the same interest rate. Or bringing people together. So, you know, having that level of wisdom, I think is, is so critical, you know, overall, because we need people in our life that can, can say, okay, have you thought about this? This does not have to be the path that you have to go.
You don't necessarily need that $200 pair of basketball shoes, you know, believe it or not. To a, you know, teenager that that may be hard to, you know, actually, get to get the teenager to, to believe that. But, sometimes, having, you know, a college student, you know, who's in their life, it says, oh, yeah, I did,
I made that mistake. I don't that that's not going to bring you happiness. Believe me, you'll enjoy it for a day and then you'll move on.

Austin
Right. Well, and I think to that point; it's, we asked the church for help, not just to help me process the decision, but this is maybe one of the hardest things for a Western civilized culture or Western civilization to wrestle with is that I like my independence. I don't like thinking that I am needy, or that I am in need, or that I have become a burden to somebody else.
And I think that's something that we have so often avoided or kept at arm's length within the American church, or just in American society in general that we are saying, okay, I rather than asking for a brother or a sister to help me with whether it's a car or a medical bill or anything that comes up, I will take on debt, rather than ask for help.
And I think the reality there is we just live in a broken world where we have become so self-sufficient that I won't ask the Lord for help. I won't ask for my brothers and sisters, but I'm going to try to pull up my bootstraps, take out a loan, and become a slave to the loan. Like the reality is, a lot of churches have benevolence funds.
There are so many individuals that I know in churches that have wealth that want to share it, and there is joy in being able to share it. And so it's not just asking for wisdom. I think having the humility to say, hey, I've come on a hard time. I got a $5,000 bill because my daughter broke her arm, and insurance isn't covering it all,
and there's 14 doctors that all have their hands in the pot. And I don't have it. I had, I was building back up on savings, and it's just not there. I'm sharing those needs with our church and with our brothers and sisters, you might be surprised at when the Lord actually will provide through somebody else.

Spencer
Right. Well, and some of that, like you said, it's vulnerability because there has to be a, a level of saying, I need this. But also here's how I got here. And sometimes, you know, if we're honest, we don't like the path that we took to get there, and so having someone speak into that and maybe also need to come alongside for a season to support that; is also, you know, challenging to allow, you know, others to do that.
But that's so helpful. And also just recognizing if you try to pull yourself up by the bootstraps in a lot of circumstances, it's just going to get worse and worse. It's kind of like, you know, as we try to help our kids understand, a godly path in terms of admitting mistakes, it's admit the mistake as soon as you can, because if it grows and festers, it's going to get worse and worse.
So if you make a mistake and, you know, you broke something in the household, don't let it just sit there for a month and us not realize it until the moment of need, say, okay, mom, dad, you know, I did this, and it can be addressed so much more easily. It's the same kind of thing.
I think when we get to a point where we might be tempted to take on that high interest debt, to be able to actually just go at that point and confess that need and say, I don't want to go this path. What are my options? Come alongside help me, you know, in this.

Austin
Yeah, absolutely. Spencer, I'm really grateful that we had this conversation about high interest financing and debt in general. Clients, if you have questions about this or if you're wrestling with how do I, as a churchgoer, participate in helping my brothers and sisters in Christ as they have need, we would love to have these conversations with you. As always, feel free to leave those comments down below and we'll see you again next time.
If you found this episode valuable, share it with a friend and subscribe on your favorite podcast platform so that you don't miss the next episode.

Disclaimer
This content was provided by Second Half Stewardship. We are in Knoxville, Tennessee and you can visit our website at www.secondhalfstewardship.com. The information in this recording is intended for general, educational and informational purposes only, and should not be construed as investment advisory, financial planning, legal, tax, or other professional advice based on your specific situation. Please consult your professional advisor before taking any action based on its contents.