Hidden Nuggets Series #36 – “At the end of every seven years you shall grant a release of debts. And this is the form of the release: Every creditor who has lent anything to his neighbor shall release it; he shall not require it of his neighbor or his brother, because it is called the Lord’s release.” Deuteronomy 15:1-2
This actually happened in the Old Testament of the Bible as you can see from the verses above. God required the Hebrew people to release the debts of the poor every seven years. That’s right…if they still owed money at the seven-year interval, their debt was cancelled.
Sign me up for that program!
If this seems like an odd thing, consider God has always had a special place in his heart for the poor. There are many verses in the Bible related to the proper treatment of those less fortunate. I see this as God’s way of giving them a fresh start and squashing any potential exploitation of the poor at the hands of the wealthy to carry on indefinitely.
Whatever the reason it’s clear God did not want his people staying in a perpetual state of debt.
I’ve often wondered how this practice impacted their feelings about borrowing and lending.
From a borrowers perspective, one would think this allowed it to be open season to shrug off your debts. I mean if they are just going to be expunged after seven years, why worry about paying it completely off? I’d be tempted to pay only the minimums and let the principal ride.
If I did that and it became apparent I had no intention of paying off my loan, it would probably damage my reputation in the culture, the ancient equivalent of getting your credit score dinged. With my reputation stained, I would probably never have another shot at getting a loan. My questionable character would be too big a risk.
In this environment, it would seem creditors would be less likely to extend money to borrowers. I’m sure the screening process to get a loan would be more stringent. The standards of qualification would be higher to make sure people truly had the means to pay the loan back. Creditors would take on less risk, especially the closer you came to that seventh year. Loans in the sixth year would most likely be very small.
In a world where credit is less available, people have to get by in other ways. They have to decrease spending and save for purchases instead of having things right away – something we in the personal finance world call delayed gratification. Some have to take on a second job to earn more money. People also end up relying on family or friends more in a time of need instead of seeking loans from the banks.
I’m sure this type of forgiveness program will never be a part of our culture. Both sides love loans too much – borrowers because of the instant access to goods and services loans grant – creditors because of the money they make in interest off the loan. It would certainly change how we viewed the process of borrowing and lending.
How do you think borrowing and lending would change if this seven-year forgiveness plan existed today? Would you borrow more or less? What perspective do you think lenders would have? Have you ever had a debt completely cancelled?
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