8 reasons to pay off debt as quickly as possible
It goes without saying that debt is bad. There’s nothing enviable about owing money to others, and nobody can argue against the idea that clearing a debt is an objectively good thing. But once you start examining the realities of debt from all angles, it becomes clear just how overwhelmingly advantageous it is to pay it off as quickly as possible.
There are plenty of incentives for doing so, ranging from financial motives to practical and even emotional ones. Here’s eight reasons why you should waste no time in getting rid of a debt.
1) Debt is uncomfortably consuming
A debt doesn’t just sit around and wait for you to pay it. No, it lurks constantly over your shoulder, rearing its ugly head every chance it gets.
Debt collectors tend to have few reservations about sending out frequent emails and phone calls pressuring you to pay up. Even the best of days can turn sour on a dime when you’re reminded of your debt out of the blue. It’s a stressful shackling that should we could all do without.
2) The more you put it off, the worse it gets
This is key. Any time you try to put off paying a debt, you risk subjecting yourself to interest rates that will cause it to grow even further. The damage done by these increases will depend on the negotiations you have made in taking on the debt.
No matter your arrangement, it always makes sense to get payments in on time—getting payments in early is even better. Most loans accrue interest based on a fixed interest rate, and chipping away faster at the overall debt means that that fixed percentage will in turn be smaller going forward. Plan to set aside money for every debt payment and always look to tack on a little bit extra if your situation allows for it.
3) You'll be better prepared for emergencies
It’s difficult enough as is to budget properly when you’re drowning in debt; it’s another thing entirely when you have to manoeuvre around an unforeseen obstacle. Things like funeral expenses, medical bills, and appliance/technology replacements will be an enormous burden if you’re already on the hook for regular payments. Control what you can, don’t become vulnerable to the unpredictable scenarios that life may send your way.
4) Protect your assets
You never want to have to cut into what you already possess. But when a debt remains unpaid, it will eventually need to take precedence over other assets. As anyone who’s ever played out a Monopoly game to its bitter end can attest to, surrendering assets is the only way to stay afloat sometimes.
Loaners can and will seize assets if a debt has reached a breaking point. Don’t give them a reason to make you sell off your car, property, or other valuables.
5) Improve your credit score
An important factor in determining your credit score is debt-to-income ratio. A hefty debt that isn’t balanced out by a significant income will jeopardize your ability to secure credit going forward. Low credit scores drastically limit your financial options. Drawing out a debt will only hinder your chances of maintaining a healthy score.
6) Investment opportunities
Making good investments is one of the best ways to grow your finances. It’s also something you don’t have the opportunity to do when you’re mired in debt. Having a clean financial slate allows you invest extra income in potentially rewarding stocks and mutual funds instead of perpetually putting it towards damage control.
7) Take advantage of what's out there
Devoting almost all of your non-essential funds to paying off a debt means that you’re at a disadvantage when it comes to enjoying certain pleasures in life. Money isn’t everything—and the least well-off are often just as happy as the wealthiest in society—but it opens up all kinds of doors that can lead to enriching experiences.
A surplus of post-debt income can be used to pursue hobbies, visit new countries, eat well, assist charities, etc. Whatever it is that interests you, being debt-free will allow you to enjoy it with optimal peace of mind.
8) Feel empowered
Climbing out of debt is an achievement that you can take tremendous pride in having accomplished. It attests to your resolve, your work-ethic, and your sense of responsibility. If you make it to that point, then you deserve to press pause for a bit, savour the moment, and give yourself a nice pat on the back.