A while back, I wrote an article titled “Is Debt a Sin?“. I explained that God never condemns those who borrow money, but He provides several cautions against debt. I took a strong stance against debt in that article, but I want to make something clear to you.
Most Christian financial ministries are very opposed to debt of any kind. There is almost a sense of debt being evil – something that no Christian should be involved with. But the Bible never says that, and God nowhere forbids the use of debt. God warns against the dangers of debt, but there are prudent uses of debt that Christians should consider.
Good Debt or Bad Debt?
The personal finance world often tries to make a distinction between good debt and bad debt. But that’s pretty stupid. Debt doesn’t have inherent qualities of being good or bad. It all depends on how you use it and why you go into debt. In truth, there are only two kinds of debt: smart debt and dumb debt. That’s really what people mean when they’re talking about good or bad debt.
Smart debt is the kind of debt that’s used wisely and prudently to achieve your goals. When you’re reasonably sure you can repay the debt, don’t overextend yourself, and will get a good value for the cost of borrowing, you’re making a smart debt choice. We can use smart debt to buy a home, get an education, start a business, or (occasionally) buy a car.
Using debt to pay for vacations, shopping sprees, or unplanned, unnecessary purchases is never smart. Going into debt we know we can’t afford to repay is dumb. And borrowing money for risky ventures that are unlikely to succeed is just plain gambling.
But some of the “smart debts” can be dumb as well. Borrowing to buy more house than you need is not necessarily smart. Getting $50,000 in student loans for a degree in a low-paying career field is not very smart. And going into debt to start a business where you have no experience, have done no research, and just have a “feeling” about is flat out stupid.
God Warns Against Dumb Debt
What you’ll realize as you read what the Bible says about debt is that God is mainly warning against dumb debt. Dumb debt can put us in situations where it becomes nearly impossible to serve God as He desires. It can make us worry, drain our finances, and enslave us to our lenders.
But using debt wisely as just another tool in our personal finance belt is fine. In fact, it can often be very wise. Without debt many successful businesses would have never started, many people would never own homes, and many would never be able to get the college education that leads to a successful career.
Obviously, I’m not recommending that you use debt foolishly to start buying everything you want but can’t afford. However, you shouldn’t be completely opposed to using debt either. If you think you’ll be able to repay the debt, don’t get more debt than you need, and ensure you’re getting value for the cost of borrowing, debt can be a good and wise financial choice. But dumb debt will always be dumb – so please avoid it for your own sake.