How Much Can We Afford to Borrow? Church Loan Experts Answer. (2024)

FAQs

How much can a church borrow? ›

There are certain rule-of-thumb guidelines that generally make common sense. Each, of course, needs to be applied to the specific situation of the congregation. Most agree that total debt service should not exceed 30-33% of annual contribution income.

The principal -- the money that you borrow.

Some congregations borrow from members, he said, with the expectation that some bondholders will forgive their loans when they come due. “When that happens, you are not dealing in good faith with members.

Although loan amounts vary across lenders, the maximum amount for personal loans typically ranges from $500 to $100,000. In some cases, you may qualify for a loan larger than what you need. Before accepting any loan, consider what you can afford to repay and be sure you don't borrow more than what you can manage.

The 80% rule in churches, also known as the 80/20 rule or the Pareto Principle, is a concept that suggests that roughly 80% of the results or outcomes in a church (or any organization) come from 20% of the causes or efforts.

Yes, churches can typically obtain mortgages to finance the purchase or new construction of property. Many financial institutions, including banks and credit unions, offer mortgages for religious organizations.

Based on the OneMain personal loan calculator, a $5,000 loan with a 25% APR and a 60-month term length would be $147 per month. The loan terms you receive will depend on your credit profile, including credit history, income, debts and if you secure it with collateral like a car or truck.

The easiest types of loans to get approved for don't require a credit check and include payday loans, car title loans and pawnshop loans — but they're also highly predatory due to outrageously high interest rates and fees.

There are lots of options available for getting a $5,000 loan, including payday loans, personal loans and credit cards. For those with a good credit score and favorable debt-to-income ratio, personal loans are probably your best option, thanks to their manageable interest rates and clear repayment terms.

Summary: Borrowing and lending are both approved practices in the Bible as long as interest rates are reasonable, no interest is imposed upon the poor and the money is paid back in a responsible and timely fashion. If someone cannot fulfill these principles, it would be sinful to borrow.

Who controls church finances? ›

Churches often elect or assign members to serve on a finance team responsible for the management and stewardship of church financial resources. Ultimately, they work together to help sustain ministry and steward the church's resources well.

Psalm 15:5 – “Who lends money to the poor without interest; who does not accept a bribe against the innocent. Whoever does these things will never be shaken.” And Ezekiel 18:8, 13, 17 all echo this instruction to not lend money at interest to the poor.

If you're looking for a $50,000 personal loan, consider borrowing from an online lender, bank, or credit union. You'll need to have sufficient income, a good-enough credit score, and a reasonable DTI to qualify. Consider asking a close friend or family member to cosign to improve your chance of approval.

The monthly payment on a $25,000 loan ranges from $342 to $2,512, depending on the APR and how long the loan lasts. For example, if you take out a $25,000 loan for one year with an APR of 36%, your monthly payment will be $2,512.

In general, lenders extend $30,000 loans to borrowers with good to excellent credit, which is typically 670 and higher. But there may be lenders who lend to borrowers with bad credit. If you're having difficulty qualifying, you may consider getting a cosigner or co-borrower to help you get approved for the loan.

It should be noted that most churches repay their debts according to contract. So the discussion is not whether a church can repay, because they must; it is whether churches should borrow even if they can repay. Borrowing is not prohibited in Scripture. It is discouraged.

There is no such thing as a “contract” for forgiveness either written or verbal. (When such a contract exists the IRS would recognize the entire contracted amount to be income in the year of the contract.) Churches who wish to give their pastor's a loan are free to do so.

Similar to your own personal credit, your church's credit history is essentially determined by how well you pay or have paid your bills, debts, and/or loans.

Building Church Cash Reserves

At minimum, designate 5-10% of your church budget to build your cash reserves and increase your financial health. The first goal, similar to your personal emergency fund, would be to achieve three to six months of operating costs set aside for emergencies.