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The Benefits of Living Debt-Free

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If you’re in debt, you’re certainly not alone.

Approximately 3 out of 4 American families are in debt, according to the Federal Reserve’s 2019 Survey of Consumer Finances.

With so many Americans carrying debt, it’s easy to dismiss it. Plenty of people live their day-to-day lives shrugging off debt, but it does take a toll.

Financial stress, whether from debt or otherwise, puts a strain on people and their relationships.

In a study published by FINRA in 2021, it was found that a lack of assets, high levels of debt and challenges with money management all majorly contributed to financial stress and anxiety.

With that in mind, let’s dive into the many benefits of debt-free living.

Less stress

Long-term stress, whether over debt or something else, could be bad for your health.

Getting on top of debt is not only good for your finances, but it can be good for your body too.

Less debt also frees up headspace to think about other things, like helping your kids with their math homework or putting more time into personal fitness. 

Improving your credit

If you’re carrying around lots of debt, it could be having a negative impact on your credit score.  

The total amount of debt you have relative to the total amount of credit available to you - or credit utilization ratio - is a significant factor affecting your credit score, making up 30 percent of that score. 


If you pay off all your credit card debt, your credit score could go up.


Carrying a balance on one or many credit cards could have a negative effect on your credit score.

But if you pay off all that credit card debt, your credit score could go up, which could be helpful if you’re trying to do something like purchase a home or take out a loan.

Learn more about what credit score you need for a personal loan and what credit score is needed to buy a house

Good to Know: Another factor in determining your credit score is how you manage your debt. You could build credit by using your credit cards from time to time, provided that you pay off the balance in full each month.

By making on-time payments, you’ll be seen as a more trustworthy borrower and your score could go up. At Marcus, we offer an On-Time Payment Reward to reward customers for paying on time and encourage customers to enroll in AutoPay

After making 12 or more consecutive monthly payments, you can defer one payment as long as you have made all of your prior payments in full and on time. We will waive any interest incurred during the deferral, and extend your loan by one month (you will pay interest during this extra month). Your payments resume as usual the month after the deferral. You must request a deferral at least 16 days before the payment you want to defer is due.

More funds to invest

Perhaps one of the biggest upsides to being debt-free is the ability to invest.

With less money going toward outstanding debt, you’ll have funds to put toward the future - whether it’s retirement, an emergency fund, continuing education, a business opportunity or even a dream trip to Bali.

Thanks to compounding interest, the more you can save and invest now, the more you could have down the line. 

Whittling down debt frees up cash that you can put to work. 

Freedom to give generously

When you’re in debt, it’s a lot harder to give to those in need. You’re already so worried about your own debt that adding another expense can seem overwhelming.

Having the freedom and means to give to causes and charities is not only rewarding, but can also have long-lasting benefits.

A recent study by researchers at the University of British Columbia and Harvard Business School showed that money can indeed lead to happiness - when it’s spent on others.


Once you’re ready to get on top of your debt situation, there are a few steps you can take to a debt free life.


Without debt dominating your budget, you can spend on causes that matter to you, whether it’s taking a leading role in a local charity, sponsoring a child or giving to global charities.

Work-life balance

Instead of working extra hours or multiple jobs to make ends meet or pay down debt, you could spend more time doing what you really want to be doing.

With less financial worry, you can focus on giving your main job 110 percent. Or take time off. It’s up to you.

Learn more about setting up a budget.

Where to start

If you’re ready to get on top of your debt situation, there are a few steps you can take to a debt free life.

Talk to a banker or financial advisor

A good first step to debt freedom would be talking to your banker.

Banks often have experts on staff who might be willing to help draft a “get out of debt” plan.

But be sure to seek out more than just one expert so that you have access to a range of options.


Debt consolidation involves taking numerous different debts and combining them into a single new debt.


When you’re in debt, it’s easy to feel alone in it. But many people are in the same boat as you - probably even people you’re close to.

Ask your family and friends who’ve also struggled with debt for advice on how to go about making changes towards a debt free life.

Plus, sometimes it’s just nice to get a hug and to hear that you don’t have to stay trapped in debt.

Look into debt consolidation

If your debt situation feels out of hand, or if you just need help with numerous debts due to different creditors, debt consolidation may be a good option for you.

Debt consolidation means taking numerous debts from different creditors and combining them into a single new debt that you make debt payments on.

This can be beneficial for those who have many higher-interest debts.

With debt consolidation, you’ll only be worrying about a single debt payment with a possibly lower interest rate rather than several debts. 

Learn more about debt consolidation.

What's next?

Once you start taking control of your debt, you’ll begin to feel more freedom in your life.

Working toward debt-free living can be hard at first, but, in the end, it’ll be worth it.


Learn how you can simplify your debt with a debt consolidation loan

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.

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