Many American’s find themselves chasing after the goal of being debt free. Living a debt-free life is something most people dream of and work towards. There are several successful books and programs dedicated to this very thing. However, are there any cons to paying off debt early? Parry Custom Homes, a Pittsburgh on your lot builder, shares insight on if you are a good candidate to pay your debt off 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 wondered if you should pay off your debts early, here are the pros and cons to both choices to help you make the right decision.
Benefits of paying off debt early. The first plus when paying off a debt early is that you no longer have to send 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 with debt and those monthly payments. Having to owe less money each month, is always a benefit.
Reasons why you might need to hold off on paying debt off early. When it comes to the cons of paying off debt early, that reasoning 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.
Parry Custom Homes is an established homebuilder in the Pittsburgh area. Call or contact us today for more information about this floor plan option, or to view other homes in our portfolio that may suit your new home needs.