Co-Signing for a Church Loan

Discussion in '2005 Archive' started by Paladin, Jul 8, 2005.

  1. Paladin

    Paladin
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    Hi ... I am new to this board and have question to ask.

    Would anyone here Co-Sign for a Church loan, of 250k or greater, to construct a new building? The Church I attend cannot afford the monthly payment(I should know I'm the treasurer); but my gut instinct tells me that the Building Committee is approaching people to co-sign. An FYI, the Building Committee has yet to come to the Finance Committee for advise or consultation. We will be voting Monday on whether to construct.
     
  2. Bro. James Reed

    Bro. James Reed
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    If the church could not afford the monthly payments, then no way should they be asking people to co-sign, unless the co-signers are prepared to, and have the ability to, make the bulk of the payments themselves.

    If I were you, I would speak up and object.
     
  3. av1611jim

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    If a church cannot build a building on a pay as you go basis, then it has no business building in the first place.
    No church should EVER be in debt.

    Scripture tells us that the debtor is in bondage to the creditor and is his servant.

    WHO IS THE CHURCH'S MASTER?

    JMO

    In HIS service;
    Jim
     
  4. TexasSky

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    I don't think God would want to risk putting members of your congregation out on the streets or forcing them into personal bankruptcy so the congregation can have a "nice place to sit on Sunday morning."

    I can't even imagine the church asking that of its people.
     
  5. Deacon

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    The church constitution should clarify who has the legal responsibility and ability to sign papers for the church.

    If the church is purchasing property, it is a perfectly acceptable reason to borrow. Buildings on the otherhand are a less acceptable reason.

    Collateral for the loan is the property. In the advent of a default, the bank would take back the property. The officers of the church (not only the signature) would be responsible for any additional shortfall.

    Anyone signing for a loan that they know they can't afford is foolish.

    Rob
     
  6. Paladin

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    Jim, I am in complete agreement with you. I do not want the church to borrow money. However, many members want to borrow and that borrowing is an act of faith (I disagree 100%). The church has been placed in a bad situation due to lack of planning. We are currently meeting in mobile units provided by the SBOM and they are due to be removed in Jan 06. With little money in a building fund and declining membership, certain groups,including the pastor :(
    are pushing us towards debt.

    Another question, when the church votes on building and assuming debt, is a super majority vote the norm? ie 2/3 to 3/4 in favor.

    Thanks!
     
  7. donnA

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    When we had a church fire we had to take out a loan, but the payment was within our ability to pay, plus people were designating extra above their regular giving to the building fund. And we had to vote one person who would cosign, who was completely will, and I think a business owner too.
     
  8. IAD

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    Jim's absolutely correct. The borrower IS slave to the lender. I'm at a point now where I have no personal debt except for the house, and the feeling of having the chains fall off is incredibly freeing.

    Proverbs 17:18 says, "A man void of understanding striketh hands, and becometh surety in the presence of his friend." (KJV) While I'm a big fan of the KJV, I think the CEV translation of that verse really hits this issue on the head -- "It's stupid to guarantee someone else's loan."

    I just have to ask, Why are co-signers needed? Typically when someone co-signs a loan for someone, it's because the lending institution has deemed the borrower to be too high a risk. That's why co-signing for someone else (even a friend or relative) is a terrible idea. If a BANK (who will loan money to ANYONE!) says the person is too risky, guess what? The person IS going to default on the loan, and then you're stuck cleaning up the mess! There are lots of grown children and their parents who no longer speak to each other because of this kind of stuff.

    If the same deal is going on with your church, then the people who're being asked to co-sign need to be FULLY informed about what they're being pressed to do. If the bank has deemed the church to be an unreliable, risky, unstable borrower, then the co-signers are going to have to shoulder the burden when the loan defaults. It sounds to me like a pastor and "certain groups" are power-trippin'.

    I would recommend that your church (especially these "certain groups") go through Dave Ramsey's "Financial Peace University" class and get educated about how to handle money in a biblical fashion. Otherwise, this is a disaster waiting to happen, and lives will be hurt.
     
  9. Joseph_Botwinick

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    Tell them "no". They should not even be building if they cannot afford to do so. I would rather meet in a house than do what they are suggesting.

    Joseph Botwinick
     
  10. TexasSky

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    Donna,

    I think what you are talking about is probably a little different. For one thing, insurance probably was "on the way," just "moving slowly."
     
  11. NateT

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    If you have no money and a declining congregation, I'm not sure you should be building.

    As for co-signing, I don't think you should cosign at all. And definitely not in a church setting. Think about how you'd feel if you co-signed on a car or house or something for me. You'd feel that at least in that area that you should be able to tell me what to do.

    If a church had a group of people co-sign on the loan, they'd probably feel they had a higher role than the members that didn't.

    One last thing. I'm a big fan of Dave Ramsey
    And he makes a good point that no where in scripture does God use debt to bless His people.
     
  12. exscentric

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    I REALLY HATE TO DISAGREE, so I won't. Putting people in the congregation at risk is wrong.

    I personally would agree with not getting into debt in the first place. You can rent big halls/auditoriums for a long time before you will spend what a church would cost you. Others have built on their own manpower as they had funds (as has been suggested) and some that have money for material have hired an overseer to be there full time to build and assist volunteers in finding things to do - has worked very well.

    If they go forward be sure they do a lot of looking into building codes, zoning etc. before going into debt. In our town a church wanted to expand their sanctuary by 150 seats and they are still trying to get a city okay after four or five years of paperwork, hearings, canvasing neighbors etc. They are still a year from any possible decision.
     
  13. donnA

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    We recieved a good amount of insurance but it didn't cover the fact some of the wall in the sanctuary was crumbling for quite some time and getting it soaked through it all had to be replaced. Our building is very old and thewe had hand applied plaster walls, and the beam look on the ceiling turned out to be hand molded plaster, molded onto the ceiling, not made then applied to the ceiling. The current estimate of the value of the all the hand done work in our sanctuary alone was around 1 million dollars, they certainly didn't pay anything near that when it was constructed. And a few monthsd later we discovered the roof over part of the building that was being patched for years was about to fall in and wouldn't pass inspection, so the whole thing had to be replaced. Like I said this is an old building.
     
  14. Paladin

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    Thanks for all the advise. Our upcoming vote will be quite interesting. I moved on my own and contacted a couple of banks concerning this matter. One bank supplied a letter stating we do not have the cash flow to begin a building program. Should hear from another bank on Monday.

    Our church doest not have bylaws (another issue, among many I have with the church),therefore I need some info on whether a super majority of votes are needed to pass a building program. I feel it should be around 70 to 75%.
     
  15. Johnv

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    No, absolutely not. I would donate to a building fund in necessary, but I would never cosign on a corporate loan. That's simply asking for trouble.
     
  16. exscentric

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    Actually I knew some men that cosigned on their church building a few years back - they were stuck with making the payments when the pastor took off in one of his huffs.

    I must admit it motivated them to keep the church going :) Not that they wouldn't have, they were neat men of God, but they were in a pickle themselves financially for awhile.

    As to the vote, if you don't have bylaws it is going to be up to a majority probably, but I'd personally look for at least 75% if not higher. This is a major step - really big step since you don't have the cash flow to do it.
     
  17. Pronto

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    Truth of fact as a member of a church you are already on the "hook" for any loan that the church may take out. Membership has it's privledges and responsibilities.
     
  18. Joseph_Botwinick

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    I can move my membership before that happens... :D

    Joseph Botwinick
     
  19. Johnv

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    I fail tosee how members are on the "hook". If the church defaults on the loan, the members are not legally responsible for it. The moral need of members to financially support their church is a separate issue.
     
  20. StefanM

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    The individuals are not liable if the church is incorporated or if the state in which the church resides absolves the members of personal responsibility. Arkansas is one such state.
     

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