Could It Be Better to Pay Off Debt Slowly?

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shutterstock_118234384When faced with debt, the first response is often to try to pay it down as soon as possible. This makes sense from a financial standpoint, since you get rid of a high-interest debt faster, paying less overall.

But what about the psychology behind paying off debt super-fast? In some cases, it might actually make sense to pay off the debt slowly if you are perpetually caught in the debt cycle.

Have You Actually Changed Your Habits?

It’s one thing to say that you can live super-frugally and demolish your debt in six months, and another thing to reform your financial habits on a long-term basis. In some cases, borrowers who get rid of their debt quickly find themselves back in the same place a couple of years later. The Bankruptcy Data Project points out that about ⅓ of filers find themselves in just as bad straits a few years after filing as when they filed in the first place.

The key to staying out of debt once you have paid off your loans is a fundamental change in your approach to money. If you haven’t developed good money habits, just paying off your debt — no matter how quickly you do it — isn’t going to guarantee financial success.

In order to make the good effects “stick,” you might have to take a longer-term approach to paying down your debt. Being able to make small changes as you go along, managing your finances better overall, can be a big help later on. Rather than making dramatic (and temporary) changes to pay off debt, consider making smaller changes lifestyle changes that will last much longer.

If you can make dramatic changes and stick to them, and carry them over after you have paid off your debt, that’s great! But for many people, success is more likely with smaller changes made permanent over time.

Are You Stressing Your Finances to Pay Off Debt Faster?

Another consideration is whether you are sacrificing your financial wellbeing in other areas for the sake of paying off your debt faster. Perhaps you have no emergency fund as a result of your aggressive debt paydown efforts. This can be problematic in the long run if you run into an unexpected expense. All of a sudden you have to add more to your credit card — even though you are trying to get out of debt.

You might also be sacrificing other goals to pay down your debt. It’s important to take a step back and look at the whole picture. Getting out of debt is important, yes, and you’ll save by paying down your debt as quickly as possible. But if you are jeopardizing your finances in the long-term, it might make sense to dial it back a little, and take a slower approach.

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Miranda is a freelance writer and professional blogger specializing in financial topics. Her work has appeared in numerous media, online and offline. Her blog is Planting Money Seeds.