1. TO RAISE YOUR CREDIT SCORE
One component of your
FICO score is based on your debt load. Debt load is calculated by looking at the #number of credits accounts you own and the proportion of revolving debt to the amount of credit available. Reducing or eliminating debt will increase the amount of credit AVAILABLE to you and, thus, lower your debt ratio.
2. TO LOWER YOUR INTEREST RATES ON MONEY YOU BORROW
Lenders will loan money at lower interest rates for borrowers that are not borrowed "to the limit". A higher credit score will let potential lenders know that you have the ability to get credit and that you have the capability to manage it responsibly.
3. TO IMPROVE YOUR MARRIAGE
Statistics indicate that financial issues are the #1 cause of divorce in America! Also, getting a divorce is one of the leading
reasons that people incur debt. Reducing or eliminating debt can improve communication with your spouse as well as reducing stress associated with working, trying to maintain multiple incomes, keeping up with minimum payments, and "robbing Peter to pay Paul."
4. TO INCREASE YOUR CASH FLOW
This one is simple...the less money you have committed to paying for debt, the more money you have available to spend as you choose.
5. TO ELIMINATE STRESS OVER UNEXPECTED EXPENSES
Last month, my husband and I had a $400 car repair and a $450 plumbing repair that came up unexpectedly. Because we are committed to the process of reducing our non-mortgage debt, we were able to rework our budget and pay for those expenses WITHOUT INCURRING MORE DEBT. Ultimately, our goal is to have an "emergency fund" that will cover any unexpected expense (even loss of a job) for 3-6 months. While none of us enjoys the car breaking down or the sink rusting through, it makes it MUCH more bearable if the financial aspects of those things don't make it worse!
If you have never categorized and/or evaluated the debt you are carrying, take a look at these books to start thinking more deliberately about debt. They should be available at your local library; they are easy to read and they provide practical information without being overwhelming.
The Debt Diet - Ellie Kay
Good Debt, Bad Debt - Jon Hanson
