One of the most common prayer requests I receive on a weekly basis, every month, everywhere I go is, ‘Romesh, please pray that God will deliver me from all my debts.’
Sadly, we live in a world that is drowning in debt. Countries are full of debt. Companies are full of debt. Banks are full of debt (if you didn’t know this, some banks actually borrow and give loans to you, because their cash is not enough). People are full of debt. In some instances, even churches are full of debt.
I believe that God gives us what we need, when we need it. He will also grant us the desires of our hearts as long as it is in accordance with His Word and His will. Remember, prosperity is not just about getting more money. It is also about managing what you receive wisely as a good steward. It also involves being content with what you have and trusting God for everything. It also means not being ruled by greed and lust for possessions but trusting God to provide what we need and desire by His grace.
I strongly believe and know that we can live a life free of debt if we learn to be good stewards. Now don’t get me wrong I am not laying down a law saying, ‘thou shall not borrow.’ I am saying with time, experience and learning as we become good stewards, we will not see the need for borrowings. My prayer is that many of you’ll will achieve that soon in life.
Through this blog post I hope you learn some valuable principles, that will help you manage your income, cash and borrowings wisely. These basic principles will help guide you in your decision making.
- There is nothing in the Bible which forbids taking loans from a formal and legally approved process. Community savings, investment and lending systems were present in the ancient world. That is why Jesus in His parable about the faithful servants has the following statement being made by the master to the one unfaithful servant (Matthew 25:27) ‘Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.’
- Scripture does not forbid borrowing but gives us a clear warning about its danger in Proverbs 22:7 ‘the borrower is slave to the lender’. So, we need to be mindful that when we borrow, we are indeed entering into an agreement that keeps us in a type of bond for a long period of time.
- Scripture forbids us from engaging in personal money lending for profit. If we want to help someone out financially on a personal basis, we cannot earn a profit by charging interest on the money we give. Scripture References: Exodus 22:25, Leviticus 25:35-37, Deuteronomy 23:19-20
- Before you take a loan always give thought about the purpose, you’re taking it for. The purpose of your borrowing determines the success of your borrowing. A lot of people & even businesses have their loans go bad because their purpose of borrowing was not clearly defined, or they borrowed for a certain purpose but used it for another and then got stuck.
- Is the purpose you’re taking the loan for a sensible purpose? Is it to own an asset? Is it to fulfil an urgent need? Is it to fulfil an impulsive need? Is it to impress people? Is it to keep up your status? What is the purpose for taking the loan? The purpose is important. If the purpose is sensible and valid, then it is a good indication that wisdom governs the way you think.
- Investing in an asset that increases in value is a sensible purpose. Taking a loan to buy a house/property is sensible. Not only do you have a permanent place of residence, it is also a very good investment. Since property prices in Sri Lanka always seem to rise, you will have an investment that is increasing in value. However, there is something important to remember here. Don’t blindly go buying property. The location of your property & future developments in the area have an impact on whether your asset will increase in value or not in the future. Talk to people. Take time and gather information before choosing a property.
- Investing in your future development is a sensible purpose. Taking a loan for education is good as long as the course of study that you plan to do is relevant and recognized in the profession you have chosen.
- What about a vehicle? Well, don’t make a vehicle your first priority in life. Yes, you need a vehicle but consider buying one when you have reached a certain level of financial stability. If you’re going to buy it through a loan, then make sure it is a brand that has a high resale value.
- What about loans taken to fulfill urgent needs? Now here is where it gets tricky. When it is urgent, we look for quick solutions which is usually borrowing. Decisions taken hastily without evaluating the future consequences can lead to tough financial situations. That is why we need to apply wisdom and faith together in life in order to face life’s tough situations effectively.
- We cannot always foresee when the next emergency would come, but it is always good to prepare for any emergency in advance. For example, whilst we trust in God for good health and healing, He has also given us wisdom to direct our steps. Hence having a health insurance in place is not wrong at all. If this is too costly, then a principle that I have adopted for years now which is to always put aside a certain amount either weekly or monthly in a separate account always comes in handy when faced with an unforeseen event.
- ‘Think a little more/think twice before borrowing’ purposes. There are some hidden purposes of the heart that drive our reasoning to borrow. What are those purposes? To maintain a social status. To fulfil an impulse. To show off to others. We might not openly say it, but those are what drive us to take a loan. For example, couples spend millions for very lavish weddings. You will not believe how many couples I have prayed for, so far who are struggling to payback the loans they took to spend on their weddings. I have also heard of couples having divorced not even having paid back half of the loan taken for the wedding.
- Borrowing to show that you’re prosperous will lead to disaster. Don’t plan your wedding to show off to others or keep up a status. That will drag you to financial ruin especially if you’re borrowing to pay for it. Be wise. Think now and borrow later. Most people borrow now and think later. Think before you borrow. Yes, you may like to travel. Yes, you may like to buy the latest furniture. Yes, you may like to buy the latest in electronics. However, thinking, planning and using wisdom will help you be prosperous every day for the rest of your life. If you go to fulfil every impulse of your heart by borrowings, then all throughout your lifetime, the bank will be your master.
- Businesses also should clearly know their purpose, plan, evaluate options and then decide to borrow. Why do you want to borrow? Is it to grow/expand your business? Provided what you offer has a good market backed by a good brand image and marketing plan, you may proceed.
- Are you borrowing to settle other borrowings? A definite No. Don’t ever do that. You will always remain a borrower for the rest of your life.
- Don’t ever borrow to give your directors money. In my time at the bank, at least 60% of business loans went bad because directors pulled out money from the business for many reasons (usually personal). Don’t ever do that. That is recipe for disaster.
- Once you have decided that you need a loan; sit and plan. Budget nicely. Decide on the exact amount you will need. Calculate how much you can repay per month and decide on a repayment period. Don’t just blindly take the longest possible period to repay or the highest possible amount the bank will give you. Do your detailed calculations in advance and have a budget and a plan.
- Never let the total amount of monthly repayments on loans, leases and credit card payments to exceed between 30-40% of your monthly income. Remember you also need money to live daily. If everything goes to repay loans, how will you live? Some banks and finance companies are very liberal in giving people loans and credit cards. However, we must be wiser otherwise we are going to get stuck financially and slaves to the lender for life.
- Don’t misuse or divert money for other use. If you have taken a loan for a sensible purpose as I have outlined above, use it for that. When people borrow for one purpose and use it for another, they usually get into a huge mess.
- Never ever become a guarantor for anyone’s loans. It can be even a family member or a best friend, don’t. If they don’t pay, you will have to pay. Proverbs 22:26-27 (amplified) says ‘Do not be among those who give pledges [involving themselves in others’ finances], or among those who become guarantors for others’ debts. If you have nothing with which to pay [another’s debt when he defaults], why should his creditor take your bed from under you?’
- A credit card is a ticking financial time bomb. Credit cards are designed to play on your impulses and emotions – the ‘enjoy now, pay later’ concept. The so-called discounts you get on cards is a clever marketing illusion. There is no actual saving there for you. Another aspect of a credit card is that it almost never seems to get paid up in full. It always seems to be close to the limit. When you have a lot of cards, then its disaster! Best thing is not to have a card. If you need one, get only ONE; yes, one card is enough. If you use it during the month, settle it fully or if it is a high value item put it on an instalment payment scheme.
- Never borrow from personal money lenders. You might get the money you need quickly but you will never be able to repay even the interest. A huge amount of interest is charged on a daily basis. Please remove money lenders from your list of options permanently.
- Is pawning acceptable? Keeping your jewellery and other valuables as security and borrowing money is a widespread practice here. It is a quick way to get cash, but it is also a quick way to lose your valuable items. My recommendation is going to be hard for you to accept but I am going to say it anyway. It is far more sensible to sell your valuables and use the money for your need than borrow against it and fall into an even deeper mess.
- Have a banking relationship with a maximum of 2 banks/financial institutions only. A lot of individuals and businesses have borrowed from so many different places on so many different terms and conditions that in the end they get into a such a big mess and state of confusion in managing all their accounts and borrowings. So, keep it simple. Don’t complicate your finances. Also don’t go bank fishing. If one bank/financial institution says no to the loan, people go to another and another and another until finally someone gives them a loan. If it is a ‘no’ remember to discern that maybe it is better to wait and either delay your plan to borrow or look at other options for raising finances.
- What do I do when I cannot meet my loan commitments? Don’t wait till it gets bad to act. When you foresee that you will have it tough, go speak to your Account manager in the bank or get counsel from someone with financial knowledge and plan out a settlement plan to tide through the tough periods. Hiding it or just waiting for something to happen will only result in your loan going into bad status and losing whatever you have pledged for the loan.
- If you can pay cash, always pay cash. Why borrow and be in bondage. This is the best tip I can ever give you.