After The Debt: What Happens Next?

The moment you make the last payment to your debts is the moment your life can begin again.

That’s what common sense would tell you anyway. If you have done all you can to chip away at your debt, the idea of basking in the light at the end of the tunnel is an attractive one. You now have financial freedom; more of your paycheck is your own, without the subtraction of debt repayments. Your new life begins now.

The problem with this kind of “everything changes for the better” attitude is… it’s somewhat false. While it is always a good thing to pay off your debt, that doesn’t mean there aren’t undercurrents and potential problems that you may encounter when you make that last payment. Being ready for these is essential, so here’s what you might face as you embrace your change to a debt-free life…

#1 – Lost Purpose 

Paying down debt is a challenge. It’s not a simple challenge, either; it takes time, effort, and commitment to get to the point where you can clear all of your balances. All of this means that, by the time you actually clear your debt, you’ve dedicated hundreds of hours to doing so.

And now you have nothing to do.

You have nothing to strive for, no additional goal, no satisfaction when you see the balances come tumbling down. It’s important to try and refocus that energy into something productive, such as a savings goal. Otherwise, you might find yourself feeling more depressed than delighted when you make that last payment.

#2 – The Impact On Your Credit 

Paying off debt should be doing nothing but good for your credit, but that’s not always the case. This is especially true if you had to contact lenders to obtain a repayment plan. This will have left a black mark on your credit report. Furthermore, most lenders like to see you using credit – at least a little bit – so an endless raft of $0 balances doesn’t actually go in your favor.

Of course, there are steps you can take to mitigate this. Experts like can help you set your report back on track. You could also look for a credit card you spend $50 per month on and then always pay off in full, just to reassure lenders you’re using credit responsibly now.

#3 – The Risk Of Overspending 

With debt repayment amounts no longer needing to figure into your personal finances, you can feel like you’re on the receiving end of endless amounts of money. Finally, you can do, and spend on, whatever you want!

That attitude is understandable after months – potentially even years – of enforced tightness with your cash. However, it’s important you don’t go too far in the opposite direction and spend more than you can afford. If you do, then you could find yourself right back at the start of the cycle again.

Congratulations on paying off your debt, but keep in mind the need to avoid the above – so you can keep your finances on solid ground this time around.

Categories: Loans And Debt

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