Borrowing and Lending in 2023
Today Christians should consider the ethics and prudence of borrowing and lending. As borrowers, we should feel 
confident that debt is a legitimate tool for us to use prudently. I suggest we use the paradigm of productive debt versus unproductive debt. Productive debt increases our capabilities to work, create, steward, and bless others. Unproductive debt creates burdens, hardships, and reduces our ability to steward resources and bless others.
With debt you acquire an asset right away and then increase your “ownership” of it over time by paying off the debt. Borrowing to buy a house can be a productive use of debt if we are prudent: not taking out more debt than we can reasonably repay with our current and future job prospects or taking a significant risk by borrowing the entire value of the house, which may decrease in value over time. Similarly, borrowing to buy or build housing for others can be another productive use of debt.
Borrowing money can also be justified when put toward other productive endeavors like starting a business or paying for education or for job certification. Often these loans have reasonable interest rates and repayment schedules. And most importantly, from a theological perspective, these kinds of loans can increase our capacity to carry out the cultural mandate and our means of loving our neighbors.
In contrast, unproductive borrowing tends to center on consumption and should generally be avoided. Most borrowing for consumption damages one’s financial position—leaving us with fewer resources to share with or give to others. Borrowing for consumption is also usually economically unproductive. Buying a boat or new clothes or dining out are generally superfluous economic activities. This doesn’t mean that owning or enjoying these things is necessarily sinful, but they are not part of the cultural mandate of creative production.
Of course, in rare or extreme cases, borrowing for consumption may be productive. After all, we need food and clothing, and shelter in order to live and flourish. While there may be times, often because of misfortune, when we need to borrow to pay bills or to bridge a period of unemployment, such borrowing limits our capabilities. Our options for work, spending, and giving shrink because we have to service our debts. Borrowing for consumption can also amplify our passions and our appetites rather than our creative and productive capacities.
When it comes to lending, Christians need to exercise discernment. Lending at well above market rates should be scrutinized closely. Are we able to charge such a rate because someone is desperate or stuck? Are we their only option for funds? If so, we should remember the teaching of the Old Testament: Are we impoverishing a brother or friend when we should be aiding them? There is no simple rule for the diverse situations we might face.
After all, the risk of default may justify an unusually high rate of interest. But would offering someone a lower rate show more care? Should we offer the loan without interest? Or give the resources away entirely? Or could the loving thing involve not enabling the other person to spend more money? Answering such questions requires wisdom.
In the marketplace of impersonal exchange, however, there is greater latitude in what interest rates we may charge. I suppose, like gambling, Christians should generally avoid creating or working in payday or credit card or consumer debt businesses that deal primarily with unproductive borrowing by people in difficult circumstances. These kinds of businesses have little to do with expanding people’s ability to create or to serve others. Instead, they tend to cater to people’s appetites—or desperation—while ultimately reducing their options and capacity to love God and their neighbor.
So, how should Christians think about debt? As a powerful servant or a cruel master.
Although I have focused on individual borrowing and lending, similar principles apply to government borrowing. Unfortunately, many politicians and governments borrow money to pay for consumption of various kinds, rather than for productive investment. This can hobble countries as their interest and debt payments crowd out other forms of public spending.
President Biden’s proposal to forgive large sums of student debt provides an interesting test case. First, consider what the policy would do. It would “forgive” $10,000 (or even more) of someone’s student debt—that is, money borrowed directly or indirectly from the government to pay for college. While that improves their financial position, it means that the lender (i.e., the federal government) will now receive that much less money from debt repayment. A loan has become a gift.
Now, in a private setting, if a lender chose to forgive someone’s debt, we would consider it an act of charity. But this case is more complicated because the federal government is the lender and it represents the American people. Furthermore, it is only a couple of politicians deciding, on behalf of everyone, to make this “gift.” And it will mean either higher taxes to compensate for less debt-repayment dollars or greater borrowing by the federal government. So we are warranted in asking: What does this policy produce? If the answer is not much, then we can lump this policy in with hundreds of others that create debt for consumption rather than production, further undermining the financial capacity of the nation’s government.