(4) The Debt Dilemma: How to Find Freedom from Loan Slavery

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(4) The Debt Dilemma: How to Find Freedom from Loan Slavery


School loans, car payments, mortgages, credit card debt—do any of these sound familiar? Perhaps you’ve had one or more of these in your lifetime and wondered: Is it a sin to be in debt?


The Bible says:


The rich rules over the poor, and the borrower is the slave of the lender. (Proverbs 22:7 ESV, emphasis added)


Ellen White adds:


Be determined never to incur another debt. Deny yourself a thousand things rather than run in debt. This has been the curse of your life, getting into debt. Avoid it as you would the smallpox. (Adventist Home, p. 393, emphasis added)


Debt is likened to slavery and smallpox all rolled into one—it certainly sounds like no laughing matter! But as bad as all this sounds, the question remains: Is it sin?


Is Debt Sin?


Let’s take a look at the Bible again:


For the Lord thy God blesseth thee, as he promised thee: and thou shalt lend unto many nations, but thou shalt not borrow; and thou shalt reign over many nations, but they shall not reign over thee. (Deuteronomy 15:6 KJV, emphasis added)


Although this text plainly indicates that the ideal is to not borrow, it’s interesting to note that the ability to lend to other nations is described by God as a good thing. Would one of the evidences of God’s blessing on the nation of Israel be that they could cause other nations to sin? Obviously not.


Take a look at this episode in Ellen White’s experience:


I now write to ask you if you will let me have the use of two thousand dollars to help me in bringing out books that the people need….If I should fall in the conflict before the Lord’s appearing, my sons would carry forward the work of circulating my books according to my plans. When the expense of issuing my books is lessened, the sales will soon pay up all my debts…. (Publishing Ministry, p. 209, emphasis added)


It certainly is difficult to categorize debt as a sin in light of this passage. Nevertheless, this doesn’t negate the principles we read earlier about debt being slavery to the lender or financial smallpox. So we must conclude that while debt isn’t a sin, it is still a bad thing—something to avoid unless absolutely necessary.


Two Rules for Acceptable Debt

So this begs the question: What constitutes acceptable reasons to incur debt?


Fortunately, we don’t need to look far for that principle.


In the passage from Publishing Ministry above, Ellen White explains what she was borrowing money for—to print books. Notice she explicitly stated that the sale of these books would pay off the debt incurred. This is the fundamental rule for acceptable debt: Whatever we borrow money for should be able to pay off the original debt incurred.


Some examples of this could include a business loan to increase production, or a student loan to launch a career, or a home mortgage to purchase a house. In each of these cases, what we are borrowing for can pay off the debt either through capital appreciation or increased earnings or both.


So this leads to an important corollary to this rule: Never borrow money for something that only goes down in value. It stands to reason that if we should only borrow money that can pay off the debt, anything that goes down in value doesn’t qualify.


Items such as gadgets, clothes, food, or even vehicles should never be purchased with debt. For example, a computer purchased for $1000 may be worth $500 in a year. However, if we borrowed money from our credit card to purchase that computer and had to pay 20% interest, we’ve paid $1200 for a computer that’s worth only $500! Not only did it precipitously depreciate in value, but by paying interest on top of the purchase price, we paid far more for it than it was worth! Not a smart use of money, and certainly not gathering up the fragments!


So to summarize, the two rules for identifying acceptable debt:

  1. Only borrow money if what is purchased can pay off the debt.
  2. Never borrow money for something that only goes down in value.


Two Rules for Credit Cards

The problem with the common perception of “The American Dream”—that state of economic bliss aspired to by countless people—is that it’s mostly a façade. Living “The American Dream” to most American consumers simply means buying whatever we want, however much we want, whenever we want—even if we can’t afford it. The aspiration for this illusion of wealth has led countless individuals to assume that credit cards are the path to living this dream.


It’s not that credit cards are evil in and of themselves. It’s the use of credit cards with no self-control that’s the problem. So if you’ve demonstrated that you don’t have the necessary discipline in your credit card use, it’s far better to cut them up and live on a cash-basis. Time to cure that smallpox! It is more than possible to exist in the modern economy without a credit card; just use a debit card.


A disciplined use of credit cards involves just two rules:

  1. Pay off the entire balance every month, and never carry a balance.
  2. Only use credit cards to buy things that you need. Never buy stuff on credit that you don’t need!


If you violate either of these two rules, it’s time for plastic surgery—cut those credit cards up!


On the flip side, there are benefits to a disciplined use of credit cards. It helps build credit for those acceptable instances where you do need to borrow (such as purchasing a home). It can offer buyer protection and perks like insurance, extended warranties, and the like. Of course, it also offers rewards in the form of cash back and reward points/miles.


How About That Car?

It may sound like an extreme statement, but I believe that the automobile is one of the largest destroyers of wealth in the developed world.


Think about it. It’s proverbial wisdom that a car loses a huge chunk of its value the moment it is driven off the lot. But beyond the decrease in the sticker price of the car, there are endless costs around each corner: the routine maintenance every couple of thousand miles, the cost of gasoline, the insurance/registration/tagging fees, the cost of commuting (financial, physical, and psychological!), and of course, the interest on that car loan. To add insult to injury, before the car has served out it’s life of usefulness, oftentimes we trade it in for a newer car, only to start this money-draining exercise all over again!


It’s true, many people need a car, but if you buy one, don’t go into debt to do it! If you need a car, save up and buy in cash. This may mean buying a lightly used one and not exchanging vehicles as often, but that’s just another way to gather up the fragments. Also, buy only as much car as you truly need. A single guy likely does not need a commuter car, a weekend sports car, an off-road truck, and a motorcycle! (You know who you are.)


If your living situation is such that you are able to do without a car–for example, if you’re a student living on campus, or if you live in a metro area with easy access to public transport–don’t buy a car until you truly need one!


Two Rules When You Borrow

While debt may be acceptable in certain circumstances, such as buying a house or getting an education, the ideal is still to not borrow if we don’t have to. Remember, it’s not free money! We’ll still need to pay it off with interest, and it’s still an indentured servant contract with the lender!


Here are two rules to keep in mind when you borrow:

  1. Only borrow as much as you need and no more.
  2. Purpose in your heart to pay it off as soon as possible.


Paying Off the House in 2 Years

My wife and I applied these rules when we bought our house in 2013. She had been saving up for years toward her first home, long before we got married (she’s the saver in our family), and as a result we were able to apply a huge down payment on our house. Then we didn’t simply pay the minimum monthly mortgage payments, but rather shoveled as much extra cash into extra payments as possible. As a result, we paid off our home in exactly two years to the day that we closed on the house. We share more details of this story on our blog.


The Student Loans

This intentionality to only borrow as little as possible, and to pay it off as quickly as possible, can be applied to other debts such as student loans. Students should learn to work and economize while they are in school to borrow as little as possible, then they should strive to pay off their debts as soon as possible once they launch into their career.


In acquiring an education, many students would gain a most valuable training if they would become self-sustaining. Instead of incurring debts, or depending on the self-denial of their parents, let young men and young women depend on themselves. (Ellen White, Education, p. 221, emphasis added)


It deeply saddens me when many dedicated, talented, and God-fearing young people are prevented from entering God’s service because of the shackles of their student loans. How many youth, who have had the desire and willingness to serve in needy areas of the Lord’s Vineyard, couldn’t do it simply because they had to service their debt!


Yes, an education is vitally important. And yes, the cost of getting that education is very high. But rather than throwing our hands up and acquiescing that there’s no other way, I believe that with resourcefulness, intentionality about minimizing debt, and an eye single for the glory of God, He can bless and multiply our efforts.


How to Pay Off Debt

So what if we are already in debt? How do we get out of debt?


Use the Debt Snowball. Here’s how it works.


  1. List your debt balances in order of smallest to largest, disregarding their interest rates.
  2. Pay minimum payments on all debts, except the smallest one. Focus all of your effort on paying that debt as quickly as possible. That simply means applying as large a payment as possible each month.
  3. When that debt is paid off, you roll whatever amount you were paying into the first debt into your next smallest debt on the list, and attack it similarly until it’s paid off.
  4. Keep moving on from one debt to the next in this manner until it is all paid off.


The advantage of this method of debt payoff is primarily psychological. It helps maintain momentum in the debt payoff by getting quick wins. That satisfaction keeps the fire burning and helps to maintain endurance.


Mathematically speaking, you would save more money if you paid off your debts in order from the highest interest rate to the lowest. However, if the first few debts have huge balances, it may be difficult to keep chipping away at it without feeling any progress. It’s easy to give up when the first taste of success is such a long way away.


The Great Thing About Debt

For many people, living a life without debt is an impossible dream. But it is possible! Besides, the great thing is that if you reach complete freedom from debt and you don’t like it, it’s always easy to go back. So I recommend it; give it a try! You just might enjoy a life free from slavery, and cured of smallpox.[1]

Read the rest of the Money Management for End-Time Disciples series!




[1] This series of articles is adapted from Alistair Huong’s six-part seminar on personal finance presented at GYC 2015.

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About the author

Alistair Huong

Alistair Huong serves as the Executive Director of AudioVerse, a supporting media ministry of the Seventh-day Adventist Church. He resides in the Collegedale, TN area with his wife, Deborah, and daughter, Leilani. In his free time, he enjoys gardening and writing about personal finance at his blog, https://www.savingthecrumbs.com/.