Being debt free sounds great and most people would love to live that way. But, having enough money to pay off your debts early might not be the best plan. While there are pros to paying off bills, there are also cons.

Pros of Paying Off Debts Early
Paying off a debt early means you no longer have to pay out that money on a monthly basis. That’s cash you get to keep to use for something else. If your monthly note is $25, and you pay off the bill, at the end of one year, you’ve saved $300. You’ll also save on interest payments. Research shows that the average person will pay nearly $280,000 in interest on credit purchases during their lifetime. And, that’s for those with a decent credit score. The worse your credit rating, the higher interest charges you get. Being able to save some of that money is definitely a win.

Another one for the pro side is that paying off debts early can result in a lower debt-to-income ratio. Lenders use this ratio to determine how well you manage and repay debt. Studies show that the higher a consumer’s debt-to-income ratio, the more likely it is that they will have trouble making monthly payments. So, paying off debts and lowering that ratio should end the struggle to pay the debt. It could also relieve the stress that typically comes when a person doesn’t have enough money to pay their bills.

Cons of Early Debt Pay-off
As noted earlier, having a lower debt-to-income ratio is good. However, having no debt could be a problem. Without debt, creditors have no way of knowing how well you manage borrowed money, and it could affect whether or not you get credit in the future. Some debt gets a tax deduction, such as student loans. Pay it off early, and you lose those potential tax deductions.

Paying off debts early might cause money problems in another area. For instance, taking a lump sum of cash to pay off all your credit cards alleviates that problem, but it could mean you have less money f       or a retirement or college savings account. Pulling together all your extra cash to get rid of debt means you may not have enough to put aside for an emergency.

Another thing to consider is pre-payment penalties. Some creditors would rather not lose out on all those interest payments, so they include an early payoff fee in the credit agreement. Check the fine print on yours before plunking down cash to wipe out the debt. It could cost you more than you expect.

Should You Pay off Debts Early
It takes money to pay off debts, and if you had that kind of cash lying around, you probably would already have less debt. So, the first consideration of paying off debts early is where to get the money. Perhaps you’ll get a windfall through inheritance or an investment, or maybe you’ll have to find the cash on your own through something like a title loan. Since the requirements for this type of alternative lending are minimal, the money is very easy to come by. When you get the cash, just be sure to weigh all the pros and cons before plunging ahead to pay off your debts early.