Statistics show that the average American household has an average of $5,315 in credit card debt alone. While your mortgage and car payment are long term debt, the credit card debt can be improved in the short term. When debt builds up, it is hard to save any money because your entire paychecks will be going toward paying your bills. In such cases, loan consolidation is a common option to settle the debt, but this may result in high interest fees. Therefore, it is important to pay off your debt as soon as possible. Continue reading to understand the reasons why.
Less Stress & Guilt
When you are thousands of dollars in debt, you are likely stressed out about how to pay it off as the interest continues to grow the amount you owe. There is also the feeling of guilt when you spend money on things that are not contributing to eliminating your debt. Once you are debt-free, these feelings will go away because you can make decisions with your money that no longer involve your debt. You can budget for a night out and set a spending limit. This will help create a more frugal financial behavior with your credit cards moving forward.
Better Credit Score
Your credit score holds a lot of weight for any lenders. A lower credit score will affect how much money they can lend you or if they even consider you a quality candidate for a loan. There are a few factors that affect your credit score and focusing on those will help you raise it. The amount of credit you are utilizing is one of the factors. Lowering your debt will help you use less credit and help to raise the score as a result. Making your payments on time and not accumulating any additional late fees is important too.
Control Over Your Financial Future
Do you dream of owning a boat? Are you interested in buying off road vehicles to ride around? Would you like to travel internationally at some point?
All of these things would be difficult or nearly impossible to do with debt. You won’t have the cash on hand to make big purchases if you aren’t ever able to save up funds over time. Gaining control of your financial future starts with debt. You can’t put your full focus into investment or saving strategies until you take care of the debt first.
Think of your monthly credit card payments. What would you do with that money if you didn’t have to pay it to the credit card companies? You could take a vacation, remodel your home, get a pool in the backyard, among many other things. When your money has been tied up paying bills, it doesn’t feel like you can use it. Once you are debt-free, you will feel that your income can create more opportunities than before. You can go from too many bills to a growing savings account for the future.
Freedom to Change Jobs
Do you feel stuck in your current job? Are you scared to leave because you need the paycheck to continue making payments on your debt? What if you had savings built up and could leave your job at any time and pursue a new career?
The freedom to change jobs at any time could be life-changing. Doing something that you enjoy versus just showing up for the paycheck could add happiness to your situation, even if it means moving to another city or even another state.
Taking out a personal loan to help pay off your debt could get you to this point faster. And no matter where you are in the U.S, there are affordable loan companies like Opportun that can help. So it won’t be difficult to find loans in Houston, Chicago, Miami, Long Beach, or other cities that can help you pay down your debt and build your credit.
There are many statistics and studies that show financial problems causing relationship problems. Failing to agree on how to spend money or how to manage debt can be detrimental to any relationship. Taking debt off the table can greatly improve your relationships because money won’t be at the center of it.
Now that you have read more about the reasons to pay off your debt, you can get started today. You don’t have to make big changes to get to a debt-free state but it will take a commitment and potential changes in your current financial actions. Every day that passes means more interest accumulating on your loans. Setting goals and attacking them is a great way to start your debt-free journey.