Just because the bank says yes doesn’t always mean your church should.
Whether it’s purchasing property, expanding a building, replacing a roof, or completing a major renovation, there may come a time when your church considers borrowing money.
There’s nothing inherently wrong with a church taking out a loan. In fact, borrowing can sometimes help a church accomplish ministry goals that would otherwise take years to achieve.
However, borrowing money is a major financial commitment that can affect a church’s ministry for decades.
We believe that good financial stewardship means looking beyond whether a church qualifies for a loan and asking a much more important question: Can we afford this loan without sacrificing the ministry God has called us to do?
Before your church signs on the dotted line, here are ten important things to consider.
1. Can We Really Afford the Payments?
A bank may approve your church for a substantial loan, but that doesn’t necessarily mean borrowing the full amount is a good idea.
About 3 million cars were repossessed in 2025. Banks loaned a lot of people money for cars that they couldn’t afford.
Churches should evaluate loan payments based on their current, dependable giving—not anticipated growth or hoped-for increases in attendance.
Consider what would happen if giving declined by 10% or even 20%. Would the church still be able to make its payments without cutting staff, missions, or essential ministries?
A good rule is to make sure the loan fits comfortably within your existing budget, leaving room for unexpected expenses.
2. How Much Debt Is Too Much?
One way lenders evaluate a church’s ability to repay debt is through something called the debt service coverage ratio (DSCR).
Don’t let the accounting terminology scare you. It simply compares the money available to make loan payments with the amount of those payments.
For example, if your church has $100,000 available annually to cover debt payments and those payments total $70,000, your coverage ratio is approximately 1.43.
That means the church has $1.43 available for every dollar of debt payments.
Many lenders look for a ratio of at least 1.20 to 1.25, although requirements vary. A larger cushion provides greater financial flexibility.
The important thing is to avoid stretching your church’s finances so tightly that one unexpected expense creates a crisis.
3. Will the Loan Limit Our Ministry?
Imagine building a beautiful new facility only to discover that the church can no longer afford to hire a children’s pastor, support missionaries, or fund community outreach.
Unfortunately, this can happen when churches focus on what they want to build without fully considering what it will cost them in future ministry opportunities.
Before borrowing, ask whether the project will advance the church’s vision or potentially restrict it.
Always invest in great staff first. People follow great leaders, not fancy facilities.
A building should serve the ministry. The ministry shouldn’t exist simply to pay for the building.
4. Why Are We Borrowing the Money?
There is a significant difference between borrowing to purchase a long-term asset and borrowing to pay routine operating expenses.
A loan for property, construction, or necessary facility improvements may be a reasonable investment.
However, borrowing to cover payroll, utilities, or recurring budget shortfalls should raise serious concerns.
If a church consistently spends more than it receives, borrowing money doesn’t solve the underlying problem. It simply postpones it while adding another monthly payment.
Cut expenses before borrowing money to stay afloat.
5. Do We Understand the True Cost of the Loan?
When comparing loan offers, don’t focus exclusively on the interest rate or monthly payment.
Churches should also consider closing costs, origination fees, variable interest rates, prepayment penalties, and balloon payments.
For example, a $500,000 loan at 7% interest over 20 years would require monthly principal and interest payments of approximately $3,876.
Over the life of the loan, the church would pay approximately $430,000 in interest alone, assuming the rate remains fixed and the loan is fully amortized.
That’s a significant amount of money!
Understanding the total cost of borrowing helps church leaders make informed decisions and compare financing options.
6. Do We Have Enough Money in Reserve?
Every church should maintain adequate financial reserves for emergencies and unexpected expenses.
A commonly recommended goal is three to six months of essential operating expenses, although individual circumstances may require more.
Before borrowing, consider whether the down payment, closing costs, and construction expenses will leave the church with sufficient cash reserves.
A church shouldn’t spend its entire savings account on a new building only to discover it can’t afford an unexpected HVAC repair six months later.
7. What Happens If Giving Declines?
Church leaders naturally plan for growth. But responsible financial planning should also consider what happens if things don’t go as expected.
What if several major donors move away? What if attendance declines? What if the church experiences a pastoral transition?
Before taking out a loan, prepare a few different financial scenarios.
Evaluate whether the church could still afford the payments if giving remained flat, declined by 10%, or declined by 20%.
If the loan only works when everything goes perfectly, it may be more debt than the church should take on.
8. Have We Considered the Additional Expenses?
A larger building usually means more than a larger mortgage payment.
It can also mean higher insurance premiums, utility bills, cleaning expenses, maintenance costs, and eventually additional staff.
Likewise, a major renovation may create expenses that weren’t included in the original construction estimate.
Churches should develop a realistic budget for the total cost of the project, including its ongoing operating expenses.
Remember, the cost of owning a building doesn’t end when the construction company leaves.
9. Is Church Leadership—and the Congregation—On Board?
Borrowing money is rarely a decision that should be made by one individual.
Depending on the church’s governing documents, major loans may require approval from the church board, or the congregation.
Beyond the legal requirements, communicating openly about the purpose, cost, and repayment plan can help build trust.
Church members are more likely to support a major financial commitment when they understand how it fits into the church’s overall vision.
10. Have We Considered Other Options?
Before borrowing, take time to explore alternatives.
Could the project be completed in phases? Could the church conduct a capital campaign? Would renovating existing space accomplish the same goal at a lower cost?
Sometimes waiting another year or two and building additional savings can significantly reduce the amount that needs to be borrowed.
The goal isn’t necessarily to avoid debt altogether. It’s to make sure borrowing is the best option rather than simply the easiest one.
Three Questions Every Church Board Should Ask
If your church is considering a loan, I would encourage your board to spend some time discussing these three questions:
- Can we afford this loan based on our current giving, without depending on future growth?
- Could we continue making payments if giving declined by 20%?
- Will this loan help us accomplish our ministry vision, or will it limit what we’re able to do in the future?
These questions may not always produce easy answers, but they can help prevent difficult financial situations down the road.
Borrow Wisely, Minister Freely
Every dollar committed to debt payments is a dollar that cannot be used for another ministry opportunity.
That doesn’t mean churches should never borrow. It means borrowing should be approached prayerfully, carefully, and with a clear understanding of the long-term financial impact.
The question shouldn’t be how much money the bank will lend your church. It should be how much debt your church can responsibly manage while continuing to fulfill its mission.