3 Things to Consider Before Taking Out a Loan

If you’ve been following the blog for the past few weeks, you know we’ve spent some time on topics that can have a huge impact on us, such as inflation and generosity. Quite frankly, the two couldn’t be more counteractive of each other. 

As I’ve thought more about inflation—and how it’s risen exponentially in the past year—I wondered: have loans people have taken out increased, too? I decided to look it up, and the answer is yes.

“42% of Americans have racked up more credit card debt since Covid-19 began.” That’s from a 2021 CNBC article headline. I can’t say that I’m surprised. For many of us, it’s tough to keep up with rising prices and stagnant wages.

Of course, there are other loans many of us had before inflation even became an issue. 

A study comparing four nations, Sweden, the United States, Australia, and the United Kingdom—and how their borrowers repay student loans—revealed that the average time it takes to pay them off in Sweden is 22 years. In the U.S. it’s 20, in Australia, nine, and in the UK, 27. That’s around 20 years on average!

Of course, 20 years to pay off debt is based on just student loans in four nations. But I imagine for debt in general, the reality is the same for many others elsewhere. So, what’s my point today?

Globally, we need to flip the way we look at loans and debt. As Compass founder, Howard Dayton, shared, there are several types of loans we should specifically try to avoid (read it here if you missed it: https://compass1.org/2022/07/04/five-type-of-loans-to-avoid/). But there’s something else we should consider: we can be the lenders, instead of the borrowers…

I don’t know what your situation is. Times may be trying, and there’s no telling the circumstance(s) that may push you into borrowing. But if you have time to think about the loan you may be considering , you may find that there is another way.

Here are some things to consider before opting for a loan:

  1. Consider your “why.”

As I’ve mentioned, pressing circumstances can be all it takes to opt for a loan. But sometimes, we can easily fall into that “microwave” mentality: “I want it and I want it now.” And the next thing you know, you just used a credit card to buy new furniture, a TV, or clothes.

Not every decision has to be made immediately. If you know you can wait, save up and then make the decision.

  1. Consider your options.

Student loans are a perfect example for this. There’s nothing wrong with wanting to go for higher education. But can you give a little to get a little? 

Yes, you can get a loan to go to school full time and be done in four years. But it may be less stressful and burdensome to work and go to school part time. This way, you can pay your way through school—and not have to worry about paying back a sizable amount of money when you’re done.

  1. Consider the cost.

Whatever it is, a new car, a wedding, an annual vacation… will it be worth the years (not to mention interest) you spend paying for it? I just named three examples that each have less costly alternatives. And I know you can think of plenty more.

A common theme with loans is convenience. They make it sound so “convenient” to just pay “on time.” But as they say, it’s easy to walk into debt; but it’s not so easy to get out of it.

I can think of several times I wanted to be able to give to someone or a cause. But I felt like I couldn’t because of debt. The strain of debt can be a huge distraction. Regarding our personal time, contentment, our families and the Lord. And because we’re distracted, oftentimes, He’s trying to speak to us, but we can’t hear.

In Deuteronomy 28, God’s desire for His children is for us to be the head, not the tail, and to lend to many but borrow from none. 

There’s so much to living a life of not being a borrower. You could lend freely… and not even expect anything back. You could be present at family get-togethers, instead of just… “there.” You could choose to work in the field you’ve always wanted to, because you no longer have to worry about making a certain amount of income.

If nothing else, think about all the possibilities there would be by changing your outlook on loans. Your possibilities could be endless. Because you choose to owe no one anything but love (Romans 13:8).

With gratitude,

Melody Stampley

Managing Editor


Melody is the founder of financial coaching business Centsible Finance LLC, which publishes the free e-letter Making Cents. She earned a bachelor’s in public relations from the University of Florida in 2014, and a master’s in global strategic communications from Florida International University in 2017; but she discovered her passion in personal finance and writing, as well as a closer relationship with the Lord, after joining a Compass—Finances God’s Way study in 2020. She now also volunteers as a financial coach for MoneyWise, serves as a member on the Compass Florida board, is the editor for the Compass blog, and a facilitator and trainer for financial discipleship studies. Melody and her husband, Nate, live in South Florida.