Here’s What Happens When You Pay Off All Your Debt

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When you’re in debt, it can be difficult to enjoy life, so paying it off can be life-changing. Find out how you can benefit from eliminating your debt. 

Unfortunately, many Americans struggle with debt. According to research from The Ascent, during the first quarter of 2023, American households had $17 trillion in debt. When you have debt, it can be challenging to prioritize other financial goals, like building an emergency fund. But, even if it takes time, many people successfully pay off their debt and improve their financial situation. Here are some benefits you can experience when living a debt-free life.

You’ll have more money to put toward other goals

It’s common to have several financial goals you’re working toward achieving. That may be stashing money in a high-yield savings account to afford a down payment on a home or hitting an investing goal so you can feel more confident about your finances in retirement.

When you pay off your debt, you’ll have more money to put toward other goals. You may be able to reach your personal finance goals sooner when you’re no longer making payments to your debt.

Your credit score may increase

Many factors make up your credit score, including your credit utilization ratio or the amount of available credit you use. Creditors like to see that you’re using only some of your available credit — not a large chunk of it. Using less credit shows that you’re financially responsible.

Experts recommend keeping your credit utilization ratio below 30% for the best success. When you pay off debt, such as credit card debt, your credit utilization ratio may decrease. A lower credit utilization ratio could help increase your credit score.

With a good credit score, you may be eligible for better financial opportunities, like qualifying for a lower interest rate when you apply for a mortgage. It pays to improve your credit score.

You have more options

Doesn’t life feel better when you have more options? Most of us want as much control as possible over our lives. When you pay off your debt, you’ll have more control. You’ll have more options to make changes that may have felt impossible when you owed creditors.

For example, if you’ve been wanting to start a new career, you may have more ability to do so because less of your money is being spent on debt, and you may feel more comfortable taking an exciting new job with a slightly lower salary since you’ll have fewer expenses to pay. A debt-free life can help unlock more opportunities in your life.

You’ll feel less stress

Money struggles are a common stressor for people. When you have significant debt, it can cause frustration and stress. Once you pay off your debt, you’ll likely feel less anxious about your finances. It’ll feel good to know that you don’t owe anyone money.

The benefits of less stress can also carry over to other areas of your life, like your relationships. Talk about a win!

Don’t let your debt weight you down

If you have outstanding debt, you’re not alone, dear reader. But don’t let your debt get in the way of living a life that brings you more joy. It’s possible to pay off debt — even a large amount of it.

The first step is to be honest about your situation. It’ll be easier to climb out of debt with a clear picture of your finances. Hiding from or ignoring your money struggles won’t do you any good, so now is an ideal time to get organized.

The next step is to create a debt payoff plan that works best for your goals. If you’re struggling to eliminate your debt, you might consider using one of the best debt payoff apps to outline a debt payoff plan that will allow you to tackle it most efficiently.

No matter where you are in your journey to pay off debt or how much debt you have, you can make positive changes to enjoy a better financial future. I believe in you!

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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