Five Benefits of Becoming Debt-Free

Paying off a large amount of debt takes a lot of sacrifice. You have to cut back your spending and sometimes get creative about making more money. Even though it can be stressful and frustrating, the benefits of paying off your debt are worth it.

You’ll save money in the long run.

The longer you carry debt, the more you’ll pay in interest. Paying off your debt faster lets you save thousands of dollars in interest, especially when it comes to high interest rate credit card debt. While there are a few different approaches you can take to pay off your debt, focusing on paying off the highest interest rate debt first will save the most money.

You’ll free up your income.

As long as you’re carrying debt, a portion of your income is already assigned to your creditors and lenders. It’s harder to focus on your other financial goals - like saving for retirement - when you have to take care of your debt obligations. Once you completely pay off your debt, you gain more financial freedom.

More financial security.

Having debt obligations can put your financial stability at risk. You have less flexibility if you run into money problems. If you’re late on payments, your finances can spiral out of control quickly. All it takes it one month of being missed payments to wreck your credit for several years. Falling behind on a mortgage or car loan puts you at risk of foreclosure or repossession. Defaulting on credit cards and other debts puts you at risk of being sued and maybe even having your wages garnished.

Better credit.

A better credit score is a byproduct of reducing your debts and making on time payments each month. Together, these two factors make up 65% of your credit score. Having a better credit score helps you get lower insurance premiums and lower interest rates on loans you get in the future. You can also qualify for better credit cards, that come with rewards and other perks.

Peace of mind.

Perhaps the best benefit of all is getting rid of all the debt-related stress. You’ll have fewer bills to worry about. If you want to scale back on any part-time work you’ve been doing, you have the option to do it comfortably. Less stress can also have health benefits and free your mind for better sleep and improve your relationships.