What are Church Loans?

Malcolm Tatum

Also known as house of worship loans or faith-based loans, church loans are loans that are granted for use in constructing, renovating or expanding a house of worship or other facility maintained by a religious organization. Loans of this type are sometimes offered by lenders of all types, as well as financial services that focus specifically on extending loans to legally incorporated religious denominations and local congregations. There are also some Christian denominations that operate their own private church loan services that are financed using denominational funds set aside to aid existing as well as emerging congregations with building or updating a place of worship.

A church loan may be needed to renovate or maintain an older church building.
A church loan may be needed to renovate or maintain an older church building.

Church loans may be used for a variety of different purposes. At times, the loans are used to acquire an existing worship facility from another congregation in the area. Renovating or adding more facilities to a currently owned church building is also often cause for seeking a loan of this type. There are also instances in which a church congregation may wish to launch a new ministry project in their community and require some outside funding to manage the project at the onset.

Church loans may be needed to expand a house of worship.
Church loans may be needed to expand a house of worship.

The process of church financing typically follows the same general guidelines required for any other type of loan applicant. This means that applicants for church loans must demonstrate an ability to repay the amount that is borrowed according to the terms and conditions associated with the loan. In situations where local church properties are held in title by denominations rather than local congregations, church finance services often require that an authorized representative of the denomination serve as a co-signer on the loan. The creditworthiness of the congregation will play a major role in the type of rate that is extended by lenders, assuming that the loan application is approved.

Christian denominations of varying sizes sometimes provide church loans to local congregations, a move that eliminates the need to seek financing from an outside source. Often, the rate of interest and the terms of repayment are more liberal than those offered by other lenders, even those who specialize in nonprofit financing. This is especially true in denominations where the title to local church properties is not held by the congregation, but by the denomination itself. Church organizations that operate with a hierarchical denominational structure are much more likely to provide church loans to their local congregations than denominations where local congregations are considered autonomous.

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