5 Reasons To Tackle Your Personal Debt Before the Year End
For many, the end of a calendar year is a time of reflection and setting goals. It might be the perfect opportunity to make some headway on your personal debt. With a new year quickly approaching, these are five compelling reasons to emphasize reducing or even eliminating your personal debts.
1. Lower Interest Payments
High-interest personal debt can get very costly after enough time, particularly with personal loans and credit cards. If you pay off some of your debt now, you can reduce the future amounts of interest that you’ll owe. Even small decreases in principal balances can lead to reduced interest payments, especially for debts with variable interest rates. Tackling this early saves money and protects you from potential interest rate increases.
2. Start the New Year on Solid Financial Footing
Your debt situation might feel so overwhelming that you feel like you need a debt relief expert, and they can help. However, you can also help yourself by paying down enough debt to start your new year with fresh goals instead of being shackled by previous financial commitments. Less debt is more freedom to focus on other things and generate momentum and success.
3. Improve Your Credit Score
Trying to tackle debt is good because your debt level is a primary factor that determines your credit score. Reducing outstanding debt can substantially improve your personal credit utilization ratio, and that’s a key component of your comprehensive score. Improving your credit score can open up more opens for you financially, including lower interest rates on loans and qualifying for better credit card perks and rewards. Doing this at the end of the year might open up steps toward buying a car or home.
4. Reduce Financial Stress During the Holidays
Trying to pay down debt during the holiday season can seem counterintuitive with all the spending on celebrations, gifts, and travel. However, keeping debt in mind during this time of year can reduce the financial stress that often elevates during emotionally demanding times. Being conscious of your debt heading into the holidays makes it less likely you’ll add more during the festivities and avoid spilling over additional debt into the new year.
5. Take Advantage of Potential Year-End Financial Windfalls
Trying to dig out of debt can take time, but there might be some year-end windfalls that you can take advantage of. Tax refunds, holiday gifts, and work bonuses might be something you can apply toward your debt, whether in full or just a portion. This lets you make meaningful progress without dipping into your normal income. Lump-sum payments can give you a psychological boost and tangible benefit. Rather than put them towards impulse purchases, apply them toward debt for lasting financial benefits.
Ring the Near Year in Right
Paying off your personal debt is always a smart financial move, but doing so before the year ends has some unique advantages. You might boost your credit score or save on interest payments. The most important factor might be setting the stage for a stress-free and financially secure new year. Tackle debt now to gain control over your personal finances and start the new year off on the right foot.
