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There’s no doubt that being in a lot of debt is a worry. It feels bad, it means you have much less money to use in your everyday life than you should, and your credit rating will suffer. If there is a very large amount of debt, it can even cause stress and health issues.
You might, however, have a plan in place to continue to pay off the debt, little by little. You’ve got used to doing this, and you’re making a small amount of progress. Would it, perhaps, be better if you paid off your debt more quickly, though? If you could have a few months of very tight spending restrictions to remove an entire loan or credit card from your file? Once you are aware of all the benefits of being debt-free, you might find that it’s easier to put money aside to pay off what you owe because you will be more motivated. Read on to find out more.
Low Interest Rates
When you have little to no debt, the interest rates that you will be offered for various types of borrowing will be much lower than if you have a lot of debt (assuming you are offered any additional borrowing at all). This can be extremely useful. Even if you think you won’t want to borrow anything again after the problems that debt caused you, when you think about it, some important borrowing decisions will still need to be made.
What if you want to buy a property, for example? Or what if you already own one but want to change to a better mortgage deal? Being able to get low interest rates will help immensely and save you money. The same is true if you need a loan to get a new car, or if you want to borrow money to start a business. Being able to get low rates is potentially extremely important.
Reach Your Goals
What are your major goals in life? Do you want to travel? Do you want to go back to school to earn a degree? Do you want to buy a house? Whatever it is you want to do, whatever is on your ‘bucket list’, if you’re debt-free you will have much more chance of being able to do them because you’ll have more available funds.
Of course, some goals are achievable even if you do have a lot of debt, but it does make things harder. Starting a business when you can’t borrow any more money means that you might have to take things slower or even cut corners and skip buying crucial things like liability insurance – this can be limiting and even dangerous. And you can travel if you owe a lot of money, but you might not be able to do all the things your once-in-a-lifetime trip offers you because you don’t have enough money left over to do them. Have no debt and you’re much freer to do what you want.
More Savings
If you’re paying off a lot of debt each month, then you probably won’t be putting any money into savings. Every penny you earn will go towards servicing your debt or debts and then anything left will be used to cover your rent or mortgage, your food bills, and anything else that has to be paid.
When you are debt-free, you can start saving. You might even choose to put whatever you were paying towards your debt into your savings account since you’re so used to paying it. Imagine how much you would have at the end of a year!
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