Being in debt isn’t something to be proud of. Debt can be your worst financial disaster, depending on the amount you owe and the kind of debt you have. Of course, when it comes to paying off your debts, you really have to be serious about it if you want to become debt-free.
The good news is, there are lots of debt program options that can help you get out of debt easily.
If you are currently not working on paying off your debt, here are seven big reasons why you should definitely start paying off your debt now.
You will save more on interest
The problem with borrowing money is that it doesn’t come for free. You will have to pay your lender for using the money they lent you. And the cost of borrowing can be quite expensive, depending on your interest rate.
If you can pay off your debt quickly by making extra payments, you will reduce the amount of interest that you should pay. That’s because you will be paying interest on the smaller balance and you will also be paying it for a shorter period.
Less risk
Being in debt can bring some risks to your life. If you are already in debt, and you don’t have emergency savings for back-up, you can be one financial step away from disaster. A major medical crisis or loss of a job can leave you incapable of meeting the payments on your debt, and that could result in your car being repossessed, being sued for nonpayment, receiving constant calls from collection agents, or being evicted from your home.
Improved credit score
A lot of debt can really weigh down your credit rating. If your credit cards or loan limit are almost approaching the limit, it can lower your score. A bad credit score can cost you so much money within a year if the interest rates are high, making it difficult for you to escape from your debt trap. So basically if you want your credit score to improve, you should pay off your debt. With an improved credit score, you will enjoy benefits such as lower insurance premiums, better interest rates and a good chance of getting a job easily because some employers check the credit scores to see if you are reliable.
Reduced number of bills
The more debts you have, the more bills you have to pay. If you become debt-free, you will have fewer bills to pay every month. You will have to worry about a few monthly expenses such as utility, cell phone service, insurance- all these expenses don’t have minimum payments, long-term obligations, and interest charges.
Increased future earnings
Whenever you take a loan from your lender, you are simply borrowing from your future income. So the amount you spend today will be taken from your earnings in the days to come. Honestly, a debt can decrease your future standard of living by giving you less money to survive than what you have today.
Debt makes money management harder
Most debts are usually paid every month. When you have other bills to pay such as car loans, credit card bills, personal loans, student loans, etc., all of them can take up a significant percentage of your paycheck. This can leave you with less money to do other things such as saving for college or retirement, buying the essentials, working towards your financial goals like buying a house. If you pay off your debt, all this money you are sending to debt payments will be all yours.
Less stress
Being in debt can be quite stressful. You keep worrying about how you are going to repay it and what could happen if you lose your job. There is constant pressure of having to work to repay the debt while feeling guilty about spending on even little pleasures. That constant pressure can really put you down. A study carried out by the Northwest University in 2013 found that youths between the ages of 24 and 32 with high levels of debt reported overall stress levels that are 12% higher than the average. Paying off your debts can take away all your worries. It can make you sleep easily.
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Paying down debt is the first lesson in personal finance 101. Start earning interest rather than paying it.
My biggest reason for paying down ALL our debt was that I was paying far greater interest on the debt than I was getting on ANY of my savings or other accounts! Every extra dollar put toward our debt was like SAVING that interest, thus a ‘guaranteed rate’ far higher than anything we were able to get elsewhere! It still surprises me how many folks haven’t figured this one out. :o)
These are all great reasons. I’ve been using a debt consolidation company for the past year and they helped remove a few entries on my credit and consolidated all my payments. I’m getting older and I didn’t want to be in debt my whole life. Debt definitely made my money management more stressful. I couldn’t even find a bank to open my account because of my past debt but they definitely helped me find a no credit check checking account. Moral of the story, fix your credit now before it’s too late!