3 Things you should know About Paying off Your Loan in Full

Most people regard loans as a safety net when they need money urgently. However, paying off the debt later sometimes makes you feel like you are being robbed at gun point by the lender. In fact, majority of borrowers fail to honor the promise they initially made to the lender because they don’t understand the benefits of living a debt free life. As a matter of fact, a debt can really drag you down financially. For a start, you can never have the guts to say that you own anything such as a car or even home appliances. This is due to the fact that a debt puts you at the mercy of the lender until the day you will clear it. You can’t therefore claim to have financial freedom when you have a pending debt. If you have been reluctant in paying off your debt in full, the following list of benefits will convince you to clear your loan balance to the last coin.

  1. Improved Credit Score

Your credit score reflects on the situation of your finances. When a debt has been pending for so long, it ends up hurting your finances by causing your credit score to drop drastically. A low credit score can really turn your life into a living hell. Majority of the lenders will turn down your loan requests. This is because they don’t want to do business with someone who has failed the test of time. In fact, every lender that you approach will first insist on checking your credit report. And once you have been blacklisted, you will never qualify for any loan even if it’s just a soft loan. On the other hand, a good credit report helps in convincing the lenders that you are capable of paying a debt. In addition to that, it increases your chances of getting a loan that has low interest. Those who have poor credit are usually slapped with a high interest rate when applying for a loan from bad credit report lenders.

  1. Offers Protection against Lawsuits

Most lenders give you a grace period to clear the loan. If you fail to beat the deadline, the lender then considers suing you in a court of law. This is because it’s the surest way of getting his money back. In most instances, the court usually orders the lender to confiscate your possessions including land, house, cars and equipment. The items are then sold by the lender so that he can recover his money. The problem is that the items are sold at a throw away price in an auction. In fact the scenario is very humiliating. Imagine being stopped in the middle of the road by debt collectors because they need to tow your car. Such problems can be avoided by paying your loan in full.

  1. Stops Debt Collectors from Bothering You

The debt collectors that work for your lender will always be a pain in the neck if you allow the loan to persist. They will call you at any time of the day to remind you about the debt. If you have several pending debts, you can consolidate them into a single loan. In fact, paying a consolidated loan is less hectic because you can give it your all. Different loans from various creditors on the hand can stress you. For a start, the deadline for making payment and interest rate is not the same. But before you consolidate the loans, it’s advisable you first use a simple loan payoff calculator to determine how much you owe each lender. This will makes things easier when negotiating for a consolidation loan.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.