Making extra payments on your debt is a quick way for you to escape debt. However, accelerating debt repayments is not the only reason why you should make extra payments on your debt. Here are some other reasons why making extra payments is beneficial to you.
Save on Interest
One primary advantage of making extra payments is the reduction of interest you pay over the duration of your debt. Interest accumulates based on your outstanding balance. The faster you pay off the principal, the lower the total interest you have to pay. This amounts to substantial savings, especially for long-term debts.
Improve Credit Score
Making extra payments and reducing your debt balance will improve your credit score. A history of extra payments and a lower debt utilization ratio will boost your credit score. This, in turn, will help you qualify for better loans or interest rates.
Improve Your Financial Situation
Extra payments will lower your debt burden. This will improve your overall financial health. As you pay down your debt, you free up more of your income, which you can use for other purposes.
Improved Financial Flexibility
As you free up more of your income, you’ll have more financial flexibility to pursue other things. You can save money to fund other important expenses. By quickly eliminating your debt, you gain total control over your financial decisions.
Peace of Mind
Debt causes anxiety and stress. By making extra payments, you accelerate the process of eliminating your debt. This will give you a sense of relief knowing that your financial obligations will soon be gone.