Being debt-free is a goal many people have. Many people want to be debt-free because they don’t enjoy having monthly bills or owing someone money. There are five other benefits to being debt-free if those two aren’t important factors.
The first importance of being debt-free is that you can increase your savings. When you no longer have monthly bills to pay on your debt you can begin saving more money. You can put all of the debt payments you were making directly into a savings account since you are in the habit of putting that money into debt.
Being debt-free can also increase your financial security. When you no longer have debt you do not have to worry about making on-time monthly payments. If you have an emergency and need to put money towards you won’t have to worry about any payments you may miss.
An important aspect of being debt-free is that you have freedom of choice. When you need to make decisions in your life, you will be able to choose the best option for your lifestyle. You may be able to take a new job in a new city or move to a new house. When you are in debt, these changes are harder to make.
When you are debt-free you may notice that your credit score increases. You may also see a drop in your credit score, but just briefly. When you no longer have debt, your credit utilization ratio will lower and you’ll be seen as someone who is not overstretched on the amount that they owe and can payback, resulting in a higher score.
The final benefit of being debt-free is that you can help others. Being able to give to others is one of the best financial things you can do because your money will aid someone’s life. When you are debt-free you can choose to donate the money that you may have been putting towards debt.