Saturday, June 4, 2005

The Advantages of Debt Free

The Advantages of Debt Free

Being debt free is a common financial goal for many Americans. While most people expect to make mortgage or rent payments, and typically car payments, being debt free usually refers to the goal of having no personal loan or credit card debt outside of housing and vehicle payments. Achieving freedom from debt brings several distinct advantages.

Financial Freedom

    Generally, when people have a goal of being debt free, what they really crave is financial freedom. Financial freedom does not mean you will never have to pay someone money again. It simply means that rather than having an obligation to make regular debt payments to creditors, you have the power to make more preferential choices about how to spend your money. The website Debt Free Destiny points out that financial freedom means having no debt hanging over your head and not having to worry about losing your property to creditors.

Less Financial Stress

    Financial stress affects personal relationships, including marriage and family relationships. Adults burdened by overwhelming debt obligations often have to worry about even minor expenditures. This constant worry about spending money causes anguish and conflict. This is especially true if two people in a relationship have different perspectives on finances. By becoming debt free, you potentially remove one of the major triggers of fights in a relationship.

More Spending Flexibility

    Jane Sanders points out in her PayingPaul.com article "The Benefits of a Debt Free Lifestyle," that being debt free offers you much more spending flexibility. When you do not have to worry about making regular personal and credit card debt payments, you can apply those funds toward discretionary spending or put aside money in savings. You are not compelled by regular principal and interest payments to creditors.

Improved Credit Rating

    It may seem ironic, but becoming debt free improves your standing to take on debt in the future. As you pay off existing debt and reduce your total debt obligation and debt utilization ratio, you improve your credit score. While you may prefer to avoid further reliance on personal and credit card debt, a better credit score puts you in good position to get an optimum rate on home financing or auto loans.

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