Debt consolidation can have long-term risks.

While debt or debt consolidation can be attractive, beware of the risks

Are you looking to God first as you live life? Do you make decisions as you look to Scripture and pray, or do you function based on human wisdom and pragmatism?

As I speak at churches and conduct Money and the Gospel meetings, the issue of debt comes up regularly. Most commonly it’s from the recent college graduate that is carrying student loans, or from those who have just been foolish and now are in trouble with credit cards and other types of consumer debt. Also, however, I’m hearing from those in their 50s or 60s or 70s who have paid tens of thousands of dollars in interest on consumer debt and have saved/given little.

While many see debt consolidation as an answer, the truth is, this is most often it’s a survival tactic that fails. It just prolongs the inevitable and ultimately results in even more interest and stress.

For many – including me – with wisdom and planning I don’t think a mortgage is a bad thing. I would even go so far as to say that other sorts of “consumer” debt may not be wrong for everyone in every situation (this is a discussion for another time).

If you search Christian debt consolidation, you will find a whole industry advertising for this business, and for many, there is short-term relief but long-term pain. Consolidating debt to have a reduced payment can end in tragedy if we haven’t experienced an internal change that drives us to focus on debt elimination.

Here are four considerations about debt and debt consolidation:

1. Debt can reinforce faithlessness

Many time debt has a real connection to a lack of faith. We want something, and we just try to figure out how to get it. No prayer (Phil 4:6-7), no desire to glorify God (1 Cor. 10:31), no seeking counsel (Prov 12:15),  or waiting on God (Ps 130:5), we just “want” it. And this can apply to college costs, or to the size of the house we buy, or our cars, or our vacations, or almost anything else.

Running to debt means we're not running to God.

Improper use of debt can tell us that we don’t need to trust God. We can get it done another way. And one of the symptoms of this way is that instead of doing an about-face and doing what it takes to get rid of our debt we seek to live with it. Why sell our toys or squeeze the budget when we can, through debt consolidation, stretch the payments out.

As long as we can manage the monthly payment, it’s easy to avoid bringing God into our financial lives. And this can lead to a very pragmatic approach to money and buying things that continues to leave God out of the financial decisions in life.

2. When the pain comes, it happens quickly and lasts a long time

This is the nature of bad decisions. The decision itself – in this case going into debt – can feel affirming and enjoyable until it’s not. At some point the tide turns, and this “turning” often happens quickly:

  • We need to start paying back the student loans, and we don’t have the income to do it. And now we’re pulling in other people (like parents) who signed for the debt.
  • With a negative job change, the reduced income means we not only need to meet our daily living expenses but now have the debt payments that are killing us.
  • We’re pregnant. And that starts a whole new stream of financial commitments and debt-payment stresses.
  • Just the accumulation of consumer debt has finally reached the point of no return, and we’re borrowing to make the payment.

Often consolidating this debt gives us false hope of survival while it just stretches out the loan and, in the end, we’ll pay more interest. And that’s if we can follow the plan. Often the pain is just delayed.

3. Debt consolidation reduces needed flexibility

Most people don’t have unchanging lives. Lots of things change, and we need to be able to respond to God’s call. One of the changes that should happen as we age is a change in our commitment to Jesus. It should become deeper and stronger, and this means using our lives more fully for the Kingdom. Hopefully, our call to love God and love our neighbor becomes the focus of our lives.

This call of God will demand flexibility. Perhaps God will call you to move. Maybe God will call you into missions or to give more. Debt takes away our flexibility to follow God, and debt consolidation means we’ll be in debt longer.

4. Debt increases your financial risk

Now this is obvious, and we’ve touched on it in the first three points, but consider this example: You’re not as young as you used to be and you’ve decided, finally, to focus on your financial planning. Giving, retirement, and spending, all need to be adjusted. But there’s this debt that isn’t going away.

Debt consolidation must come with a plan.

Now let’s say that over time we manage to move things in the right direction and then tragedy strikes. Maybe your investments decline (think 401(k), the country moves into a recession, businesses lay off employees, and you are on the list. And now, the progress you thought you were making falls apart. Now, yes, the obvious problem is that your job is gone (and because we’re in a recession, the job prospects are thin), but the debt makes everything much worse. The resources you still have are all in jeopardy because the debt is still there and the payments need to be made.

Too many people just don’t think about debt until it’s too late. And debt consolidation is only a viable option if we have a plan to eliminate our debt and we follow through.

Keep your life free from the love of money, and be content with what you have, for he has said, “I will never leave you nor forsake you.” (Hebrews 13:5)

Other articles that might help:

The Prosperity Gospel (We all struggle with this)

Being Content

A Simple Functional Budget

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