It doesn’t matter who you ask — neighbors, co-workers, friends, and even your letter carrier. Most people carry around a little bit of debt.

Your debt may represent the mortgage you took out to afford your first home, or the car financing you needed to upgrade your vehicle. It also includes the lines of credit, credit cards, and online personal loans you le

an on in emergencies. 

According to the latest Experian data, the average American owes $101,915 — an increase of 7% year over year. While this shows just how normalized carrying debt is, there’s a case for paying off what you owe. In fact, there are five of them! The below five advantages to living debt-free should act as motivation tips to pay off debt with intention. 

1. Freedom

Perhaps the biggest benefits of paying off your debts is the freedom you gain. Imagine your budget free from the monthly credit card bills and online loan payments. Without these taking a chunk out of your paycheck, you have more cash to use as you like. That flexibility provides a great sense of freedom, as you won’t have to second guess a vacation or purchase because of your outstanding bills. 

2. Save More Money

Splurging on a few items and experiences in celebration of your achievement is worthwhile — you earned it! However, you shouldn’t get used to splurging all that money you funneled into personal loans and credit. 

Reserve most of this cash for savings, automating contributions to an emergency fund and private pension plan. An emergency fund will become your first line of defence against the unexpected, so you don’t have to rely on online personal loans in the next emergency.

3. Focus on Your Priorities 

What do you want to do in life? Do you want to go back to school, renovate your home, or purchase a new car? Your newfound cash can help you achieve these big life goals. 

4. Live with Less Financial Stress

A stunning 64 percent of US adults say money is a significant source of stress in their lives. Debt can compound these worries if it ties up your paycheck, leaving you with less money to save or spend on essentials. By reducing how many loans you owe, you can give your budget and mental well-being some much-needed relief. 

5. Improve Your Chances of Borrowing

This last one may sound counterintuitive, but the reality is that most people need to borrow multiple times over their lifetime. One day, you may take out a student loan to return to campus, a mortgage for a new home, car financing for a new vehicle, or an online loan when your emergency fund isn’t enough. 

When you do, you’ll generally qualify for lower rates on these options if you don’t have debt. That’s because successfully paying off lines of credit and personal loans adds positive entries to your credit file, which in turns produces a higher credit score. 

Some lenders also check your debt-to-income (DTI) ratio, which shows how much of your monthly paycheck goes to paying off credit. A DTI of 35% or less looks good and increases your chances of qualifying for lower rates and higher borrowing limits. 

The Takeaway:

Not all debt is bad — in fact, most loans play an important role in your life when you use them strategically. But paying off these loans as soon as possible can come with many advantages.