Interest Free Loans From the Benevolence Fund?

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I am curious if anyone has experience providing individuals in financial trouble with interest-free loans as a ministry of benevolence. If so, could you share what you have learned from doing this? Are there legal issues I'm unaware of? I haven't found much on this topic from my cursory skimming of the handful of books I own about diaconal ministry. It seems clear to me this strategy has biblical precedent (Exodus 22:25; Leviticus 25:35-37; Deuteronomy 23:19-20; Psalm 15:5) and fits the call to minister the mercy of Christ (Article 25c of the Church Order).

Here is a hypothetical scenario: A lower income family who relies on government supplements to afford housing has a car accident that sets them back. They get behind on their bills and they need to pay the rent they owe in order to keep their government-provided benefits. The deacons hear their story with compassion and encourage them in the plan this family has put together to get out of their pickle. If the deacons pay the landlord $600 from their benevolence fund and treat this as an interest-free loan to the family, who agrees on it back at $50 a month over 12 months, this family could get back into a situation where they can make ends meet.

One question I think we need to answer right away is what we will do if they tell us they are unable to make the payments we have agreed upon. There must be other things I'm not thinking of. I would appreciate your questions or comments.

— Phillip

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Thanks for the thoughtful question, Phillip.  My personal perspective is that the church is not a bank and does not make loans.  In the situation you mention, give the family $600 and help them get on their feet now, not a year from now.  Making someone a creditor of the church will inevitably color the spiritual relationship, in a negative way.

Admin

I like that direction, Bill. And if the family feels called to 'pay it forward' to help other families in a similar situation down the road, they could always voluntarily contribute to the benevolence fund over time. Not to pay back a loan, but out of gratitude to God.

This family does not want a hand out but the dignity that comes with getting over this hurtle in a way they can manage with the church's assistance. I don't know what Bill Vis means by "help them get on their feet now, not a year from now." The money would be given now and they want to pay it back in a manageable increment. The church has already helped this family out with several "gifts" to cover other expenses. The interest free loan was an idea I threw out (I'd just read some of the Bible passages I posted) and they jumped on it. We could say "here is $600 and we appreciate your contribution to the benevolence as you can," but we've already done that with other expenses and everyone involved seems to want this aid to be different.

Phillip, I'd still structure it as a gift.  If along with the gift is a semi-formal understanding that they will do their best to give $50 to the benevolence fund to bring it level, that's fine.  Two advantages.  Because the $50/month is not required it become a tax-deductible gift.  And if they run tight in month seven they can use their money to put food on the table that month and drop $50 into benevolence in month 13.  The idea of a member being a formal debtor to the church sets my teeth on edge.  There is at least as much dignity in freely and joyfully giving to the benevolence fund throughout the year as there is in making mandatory payments.

Phillip,

At Many Peoples Church we carry a rollover benevolence fund that serves that purpose.  We initially set the fund up with $ 1,000.00.  Over the last 8 years since we began meeting for worship, at least 6 church members, and several community neighbors have borrowed from that benevolence fund.  Their reasons were much like the case study you described.  We ask people to sign an agreement that underscores 2 things - 1 - their commitment to repay the amount according to the terms they agreed would work with their budget And 2 - they understand that failing to repay will mean that we will be unable to help others from this fund.  The fund depends on their repayment.

So far, 3 out of 4 people have repaid the loan.  We feel like the benefits far outweigh the possible 25% losses.  It's a model Habitat for Humanity uses for home loan repayment.  This models adds an element of sustainability to charity.  That feels very much like the model used by the early church - a model that depends on healthy 'receiving' and 'giving' by God's people.

John Hoekwater