Four Reasons You Should Pay Off Debt Early

A career banker, Julio M. Herrera Velutini is the chairman of an international bank based in Puerto Rico. In this role, Julio Herrera Velutini supports the lending of bank funds to consumers and small business owners.

Borrowers of bank funds have to pay back the money over a specific time period. However, you do not have to wait until the end of the loan term to repay the money. You can opt to pay it back early. Here are four reasons why it makes sense to pay off debt obligations as early as possible:

1) No interest charges

The earlier you pay off a debt, the more you save since you won’t have to pay as much in interest over the term of the loan. For credit card debt and short term debts with high interest rates, paying debt off early is definitely what you should do to avoid interest accumulating.

2) Improves credit-worthiness

First, paying debts off early will improve your credit score, giving you room to borrow more money. Second, paying off debt improves your debt-to-income ratio, making you a more attractive borrower to lenders.

3) More money in your pocket

Paying debt early means you do not have to set aside money every month for payments. You can use this money for everyday spending or to invest. This is especially important as you approach retirement or if you are confronting significant unexpected expenses.

4) Peace of mind

Paying a debt off early will give you the comfort of knowing you no longer owe the lender anything.