S3 Eliminate High-Cost Liabilities · Lesson 3 of 4

Lesson 3 — Refinancing, Renegotiating and Avoiding New High-Cost Debt

Pursue refinancing or renegotiation on existing liabilities and adopt safeguards that prevent new high-cost debt from being incurred.

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Seven Principles curriculum version 1.0 — author-review draft pending Leland Rubin's approval prior to publication. · Leland's Seven Stewardship Principles methodology, content, exercises and deliverables are created by Leland Rubin and remain in author-review draft pending his approval.

Where this lesson sits

Curriculum version 1.0 · Author Review

Module purpose: Build a complete inventory of every liability and its true annual cost, rank payoff priority using a documented method, pursue refinancing where responsible, adopt safeguards against new high-cost debt, and offer households a product-neutral, debt-free education pathway.

Official outcome: High-Cost Liability Elimination Plan

This lesson produces: Refinancing and Renegotiation Comparison Log with a written new-debt approval policy

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Learn

Participant study reading — approximately 90 minutes of learning and shared work.

Learning objective: Pursue refinancing or renegotiation on existing liabilities and adopt safeguards that prevent new high-cost debt from being incurred.

Recommended participants: Pastor, treasurer, finance committee, and legal or financial advisor if available

Estimated teaching time: 90 minutes

Success indicators

• At least one liability has been benchmarked against current market terms through an actual lender or vendor inquiry
• A comparison log documents every refinancing or renegotiation option considered and the outcome of each
• A written policy has been drafted requiring board approval above a stated dollar threshold for any new borrowing
• Leadership can name at least two alternatives that must be compared before any future financing is signed

Materials and evidence you will use

• Completed Complete Liability Inventory and Payoff Priority Ranking
• Current market rate information from at least one outside lender or credit union
• True annual cost calculated for every offer compared
• A documented board decision on the benchmarked liability

What you should be able to produce

• At least one liability has been benchmarked against current market terms through an actual lender or vendor inquiry
• A comparison log documents every refinancing or renegotiation option considered and the outcome of each
• A written policy has been drafted requiring board approval above a stated dollar threshold for any new borrowing
• Leadership can name at least two alternatives that must be compared before any future financing is signed

Foundational ministry principle

Proverbs 15:22

22 Without counsel purposes are disappointed: but in the multitude of counsellors they are established.

King James Version (KJV) · Public domain

This proverb commends seeking multiple sources of counsel before settling a plan, which connects directly to comparing more than one lender or option before refinancing or signing any new financing agreement.

As draft framing for author review, the facilitator might suggest that comparing multiple options and, where warranted, seeking qualified outside counsel before refinancing reflects exactly this kind of multiplied counsel.

Understand the concept

Your work in this lesson focuses on this outcome: Pursue refinancing or renegotiation on existing liabilities and adopt safeguards that prevent new high-cost debt from being incurred.

Regularly benchmarking existing debt and requiring comparison and board approval before signing new debt together close both ends of the high-cost liability problem: what the church already owes and what it might owe next.

Why it matters for your church

A church that never benchmarks its existing debt against current market terms can pay avoidable interest for years without realizing it.

Without a written approval threshold, any single staff member with signing authority can commit the church to new high-cost debt unintentionally.

Failing to log below-threshold agreements immediately allows small vendor financing to disappear from the inventory exactly as it did in Lesson 1.

Examine the evidence

Use Completed Complete Liability Inventory and Payoff Priority Ranking, and Current market rate information from at least one outside lender or credit union to compare your church's present practice with its stated intentions. Look for documented patterns, missing information, and differences between what people assume and what the evidence supports.

Your completed work should be supported by True annual cost calculated for every offer compared, and A documented board decision on the benchmarked liability. Record uncertainty honestly so your team knows what still needs to be verified.

Prepare for the shared exercise

Benchmark at least one liability against current market terms and adopt a written policy preventing future high-cost borrowing without board comparison and approval. The Refinancing and Renegotiation Comparison Log produces the Refinancing and Renegotiation Comparison Log with a written new-debt approval policy, which contributes to the principle's principal deliverable.

Before working with your team, consider this reflection: What assumption about our current lender relationship did today's outreach confirm or overturn, and what does that suggest about other assumptions we have never tested?

Key terms

Prepayment penalty: A fee charged by some lenders if a loan is paid off or refinanced before its scheduled term ends, which can offset the benefit of refinancing.
New-debt safeguard policy: A written, board-adopted policy requiring approval above a stated dollar threshold and comparison against alternatives before the church enters any new financing agreement.
Qualified financial advisor: A licensed accountant, attorney or financial professional whose specific counsel this module points toward for decisions beyond its educational scope, particularly for refinancing of significant size or complexity.

What this means for a church

• A church that never benchmarks its existing debt against current market terms can pay avoidable interest for years without realizing it
• Without a written approval threshold, any single staff member with signing authority can commit the church to new high-cost debt unintentionally
• Failing to log below-threshold agreements immediately allows small vendor financing to disappear from the inventory exactly as it did in Lesson 1

Common failure patterns

• Assuming a long-standing lender relationship means the current rate is already the best available without ever asking
• Refinancing without accounting for a prepayment penalty, which can erase most of the expected savings
• Writing a safeguard policy but never communicating it to the staff members who actually have signing authority

Ministry case

Asking the Question No One Had Asked in Six Years

A fictional, explicitly synthetic congregation used here for illustration had held the same equipment loan for six years without ever contacting another lender for a comparison quote. When the finance committee finally reached out to a local credit union as part of this exercise, they received an offer nearly two full percentage points below the current rate, with no prepayment penalty on the existing loan.

The committee brought both the new offer and a request to match it to their current lender, who agreed to reduce the rate by a smaller but still meaningful amount to retain the relationship. The committee documented both outcomes on the comparison log and adopted a new-debt safeguard policy the same week, closing the exact kind of visibility gap that had let the rate go unchecked for six years.

Lesson takeaway

Discuss

Guided discussion for the leadership table.

With refinancing pursued and a safeguard policy in place for the church's own debt, let's turn to equipping the households in our congregation to do the same kind of work with their personal debt.

What did we learn from actually contacting an outside lender that we would not have learned by assumption alone?
Where did a prepayment penalty or fee change our thinking about whether to refinance?
What dollar threshold makes sense for our church's new-debt safeguard policy, and why?
Who currently has signing authority that this new policy needs to reach immediately?

Discussion notes

Practice

Applied exercise — produces the Refinancing and Renegotiation Comparison Log with a written new-debt approval policy.

Refinancing and Renegotiation Comparison Log

Benchmark at least one liability against current market terms and adopt a written policy preventing future high-cost borrowing without board comparison and approval.

Estimated time: 55 minutes

Participants: Pastor, treasurer, finance committee, and legal or financial advisor if available

Artifact produced: Refinancing and Renegotiation Comparison Log with a written new-debt approval policy

Required inputs

• Completed Complete Liability Inventory and Payoff Priority Ranking
• At least one outside lender or credit union contact

Instructions

Select at least one liability from the priority ranking to benchmark against current market terms.
Confirm current balance, rate and any prepayment penalty before seeking outside quotes.
Contact at least one outside lender and separately ask the current lender to match or improve terms.
Record each offer's rate, fees and true annual cost on the comparison log.
Bring the comparison to the board for a documented decision, whether to refinance, renegotiate, or hold.
Draft a written new-debt safeguard policy stating a board-approval dollar threshold.
Confirm the policy requires comparison of at least two alternatives before any future financing is signed.

Complete it online

Refinancing and Renegotiation Comparison Log

Church name: ______________________
Date of review: ______________________
New-debt approval threshold: ______________________
Facilitator: ______________________

Liability	Current rate / true cost	Lender contacted	Offer / outcome	Prepayment penalty	Board decision

Your response — Refinancing and Renegotiation Comparison Log with a written new-debt approval policy

Worked example

A fully completed sample using a fictional church. This is illustrative teaching material, not any church's actual data.

Riverside Fellowship (illustrative example — not actual church data)

Riverside Fellowship benchmarks its sound-system vendor financing, the second-ranked liability from Lesson 2, against outside options.

Liability	Current rate / true cost	Lender contacted	Offer / outcome	Prepayment penalty	Board decision
Sound-system vendor financing	9.9% stated / 13.1% true cost	Community credit union	6.5% offer, no prepayment penalty	None found on original agreement	Approved refinance
Sound-system vendor financing	9.9% stated / 13.1% true cost	Original vendor-finance company	Declined to match; offered 8.9%	None	Declined; proceeded with credit union

How this leadership team reasoned

• Riverside's committee confirmed no prepayment penalty existed on the vendor agreement before seeking outside quotes, removing a potential barrier to refinancing.
• The credit union's true annual cost of roughly 6.9% once fees were included was clearly superior to the vendor's best counteroffer of 8.9%, making the decision straightforward once documented side by side.

Decisions recorded

• The board approved refinancing the sound-system balance with the community credit union at the improved rate.
• The board adopted a written policy requiring its approval for any new financing above $2,500 and comparison of at least two alternatives before signing.

Completed artifact extract — Refinancing and Renegotiation Comparison Log with a written new-debt approval policy

Refinancing reduced the true annual cost on the sound-system liability from 13.1% to approximately 6.9%, and a new $2,500 board-approval threshold now governs all future financing decisions.

Illustrative exercise score: 19 of 20. Riverside's team obtained genuine outside quotes, documented both outcomes clearly, and adopted a specific, actionable safeguard policy, with only minor room to specify how below-threshold agreements will be logged immediately.

BAG Index complement

Household financial-literacy layer that complements this stewardship principle.

BAG Index complement

Debt payoff strategies and nonprofit credit counseling

A short complement introducing the BAG Index debt payoff strategies module, comparing the snowball and avalanche methods and explaining how nonprofit credit counseling works, extending this lesson's work on refinancing, renegotiating and avoiding new high-cost debt.

Teaching points

• The debt snowball method pays off the smallest balance first regardless of interest rate, building early momentum and behavioral confidence before moving to the next-smallest balance
• The debt avalanche method pays off the highest-interest-rate balance first, minimizing total interest paid over the life of the payoff plan even though early progress can feel slower
• Neither method is universally correct; a household's choice should weigh its own need for early motivation against its tolerance for a longer path to the lowest total cost
• Legitimate nonprofit credit counseling agencies offer free or low-cost budget and debt review sessions and can explain options like a debt management plan without requiring large upfront fees
• A household should be cautious of any company that guarantees debt forgiveness, demands large fees before any service is performed, or discourages contact with actual creditors

Household practice step: Each household completing the BAG Index debt payoff module chooses either the snowball or avalanche method for its own liabilities, writes the resulting payoff order, and researches one legitimate nonprofit credit counseling option available in its area.

Supports this principle: This complement gives households two concrete, research-backed methods for acting on the refinancing and renegotiation work of this lesson, and it equips leadership to point struggling households toward legitimate nonprofit help rather than predatory debt-relief offers.

This module explains general payoff strategies and how to identify legitimate nonprofit credit counseling only; it does not recommend a specific counseling agency, debt settlement company or lender, and households with complex debt should consult a qualified, licensed credit or financial counselor.

Score

Transparent 20-point exercise rubric: four criteria rated 0 to 5 with observable anchors.

Criterion	0 — not evident	3 — acceptable	5 — exemplary	Sample
Completeness (0–5)	No outside lender or vendor was actually contacted for comparison.	One outside contact was made, but the current lender was never asked to match or improve terms.	Both an outside lender and the current lender were contacted, and a written safeguard policy was drafted.	5
Use of evidence (0–5)	Comparisons used headline rates only without calculating true annual cost for each offer.	True annual cost was calculated for one offer but not compared consistently across all offers.	True annual cost was calculated and compared consistently across every offer using the Lesson 1 method.	5
Alignment to the module purpose (0–5)	The exercise treated refinancing as an isolated event unconnected to preventing future high-cost debt.	A safeguard policy was drafted but was vague about thresholds or comparison requirements.	The safeguard policy specifies a clear dollar threshold and a comparison requirement directly addressing how this liability was missed originally.	4
Actionability and ownership (0–5)	No decision was documented and no owner was assigned to manage next steps.	A decision was documented but no owner was named to manage closing or communicate the new policy.	A documented decision, a named closing owner, and a plan to communicate the new policy to all signers are all present.	4
Worked sample total				18 / 20

Completeness: Riverside contacted both the credit union and the original vendor, and drafted a complete safeguard policy.
Use of evidence: Both offers were converted to true annual cost using the same method as the original inventory.
Alignment to the module purpose: The threshold and comparison requirement are specific, though immediate-logging language could be sharper.
Actionability and ownership: A closing owner and decision are documented, though the plan to notify all current signers was not yet finalized.

Lesson-exercise scores (20 points each) demonstrate learning and artifact quality. They do not automatically overwrite the official Seven Principles assessment, which remains a separate 100-point rating of five dimensions for each principle.

Submit evidence

What must be submitted for this lesson to count as complete.

Submit

• Completed Refinancing and Renegotiation Comparison Log with at least one outside quote
• Written new-debt safeguard policy with a stated dollar threshold

Attach this evidence

True annual cost calculated for every offer compared
A documented board decision on the benchmarked liability

File upload is not implemented in this prototype. Ticking a box records that the church can produce the document; it does not store a file.

Contribute to official outcome

How this lesson builds the High-Cost Liability Elimination Plan.

Artifact produced: Refinancing and Renegotiation Comparison Log with a written new-debt approval policy

Becomes the refinancing-and-safeguards section of the High-Cost Liability Elimination Plan and supplies the board-approval policy language.

Open the module deliverable assembly

Participant reflection and notes

What assumption about our current lender relationship did today's outreach confirm or overturn, and what does that suggest about other assumptions we have never tested?

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