If you have acquired a larger amount of debt over the years, using your bonus money can be a smart move to improve your financial situation. Having high unsecured debt is expensive and mentally draining.

Paying down high debt can help you save money, increases your credit score, and improves your overall financial situation. Which in return can decrease your stress levels and improve your relations ships.

Depending on your bonus it might not be enough to resolve all your debt but it can definitely put a large dent in your debt cutting hundred off your debt.

Another option to consider if you are not able to pay most of your debt would be to acquire a debt consolidation loan or a personal loan to replace your high-interest debt with a lower costing loan. Here are a few ways solving your debt can help you:

Reduces your stress: Debt can play a big role in your mental health. Many individuals when in debt experience stress, anxiety, and even depression. This can play a big role in your in you life and might not only affect your personality but the ones close to you.

According to a survey conducted by the American Psychological Association money will be the most common source of stress with 72% of adults feeling stress. When someone has a large amount of debt it can be overwhelming to think about how you’re going to make the payments on time every month.

This can really impact your sleep, relations, and form even your health. Stress might cause headaches, muscle tension, difficulty sleeping, bad appetite, and even drug use which will cause overall unhappiness in your life.

Having a plan or paying down your loans with your bonus can lead to improvement in your life physically and mentally.

Having to constantly worry about paying your bills can have a big mental drain for most and removing that burden from your chest will help you breathe easier. Cutting stress out can be a big benefit for your life and a good way to spend your bonus. 

Improves your credit score: Having a good credit score is crucial in improving your stability and security. High credit scores can increase your chances of securing loans, credit cards, auto loans, and even mortgages with the best terms available.

This will help you save money on your loans over time and decrease your payments. If you have a large amount of debt it will be challenging to maintain a higher credit score. Having debt can make it difficult to make your payment and missing your loan payments will negatively impact your financial account.

While making timely payments will help your credit score grow. But the main reason you should aim to have a perfect credit score is because of the saving you will receive from having the best terms.

For example, if you’re buying a $20,000 car with 5% interest and a 5-year loan. You will end up paying $2,645.20 in interest, but if we use the same equation but change it to 10% interest you will end up paying $5,496.40 which will be a $2,851.20 difference.

Having a good credit score will not only have a good impact on your savings but help you get the lowest payments making it easy to budget for. 

Saves you money: Having debt or large payments every month can play a significant burden on your life and finances. Having low debt in return will increase your credit score which in return lowers your interest charges and fees that you will pay.

For example, if you have a $10,000 balance with 20% interest will add up to $2,000 in interest, but by paying down your loan you can eliminate that yearly interest saving you money.

Carrying debt with a high-interest rate will cost you a fortune and you should pay it off or consolidate it into a smaller loan increasing your savings. Also eliminating your debt will increase your credit score and create a chain of savings for insurance rates, loans, credit cards, rentals, and utilities. It is important to pay off your debts to increase your savings. 

Achieve financial goals: Having your financial goals met is essential for having a successful future. But having a lot of debt can decrease the chances of you achieving your goals.

For example, if you’re ever trying to buy a home you will need to have a larger down payment but having a lot of debt will decrease your credit score which will increase your interest and payments. This will have a domino effect which in return can decrease your chances of getting a loan.

Having high debt can decrease your success in many things such as starting a business, saving for retirement, and many other arrears of your life. Paying off your debt will help you have enough allocated funds which in return can help you achieve your financial goals. 

Improves relationships: Debt can often lead to stress and anxiety which can affect your relationship with others. This might be the case for everyone but having a lot of stress will make you more aggravated towards your closed ones.

For example, if you constantly worry about making a payment on time you will be distracted and distant from your partner. This will lead to arguments and misunderstandings which can strain your relationship.

Also being financially strapped will affect your spending time with your significant other such as going out, having date nights or even paying for small surprises. This can lead to having fear of mission out which will damage your relations ships with friends. Paying down your debt will help your finances and the relationships around you.