Should you pay off your debt early?
If you’re like most people, paying off any debts you owe is always sought after as the main goal many seek. Living a debt-free life is something most people dream of and work towards. However, what are the pros and cons for paying off debt early? Weston Dean Custom Homes, a premier New Braunfels custom home builder
, shares both sides of paying off debt early.
When times are good and money seems to be rolling in, possibly due to a raise, inheritance, bonus at work or some type of investment that paid off, it is easy to wonder if you should use that money to pay off debt early. Debt is seen as something you should pay off as soon as you can, and avoid if at all possible.
However, according to some experts, you shouldn’t necessarily pay your debts off early. In some cases, you can end up fixing one problem while creating another. If you have been wondering if you should or shouldn’t pay off your debts early, here are the pros and cons to both choices to help you make the right decision.
The first plus when paying off a debt early is that you no longer have to spend money each month to the lender, so you will have that extra money to spend on other things. You can also potentially save on interest payments doing this.
According to a lifetime cost-of-debt calculator from Credit.com, an average person will pay around $279,002 of interest over credit purchases over the course of his or her lifetime. And this is the case if you have a credit score of 620-679. The worse your credit score, the more money in interest you will pay throughout your life.
Paying off debt early will also relieve the stress that comes to debt and those monthly payments. Have to owe less money each month, is always a benefit.
. When it comes to the cons of paying off debt early, that reasoning’s might not be as clear.
If you take a large chunk of savings that you have in your checking or savings account to pay off debts, it can rob you of several opportunities.
First, when you pay off your debt payments of any kind, it helps you establish a credit history. Making your loan payments on time will help you have good credit.
Second, you do get tax deductions for interest you pay for things like student loans. Most interest paid, equals more tax deductions. However, it often isn’t by too much. Each person will have a better idea of how this would affect them either positively or negatively.
Lastly, you will have less cash flow when you put a large sum of money you have into paying off a debt. Since lenders won’t be beating down your door asking you to pay off debt early, it’s often a good idea to keep as much cash in your pocket as possible to make sure you won’t have to borrow money for something else down the road.
The pros and cons of paying off debt will differ from person to person, but these simple tips can help you decide what route is best for your circumstance in the long run.
Weston Dean Homes is a San Antonio area custom home builder. For more information call (210) 408-9107.