Posted by Mike Smith :: May 21, 2009 @ 6:42 am

Excessive debt can be just as restrictive on spending as responsible use of credit. Coupled with the reduced freedom that accompanies debt, lowering – or eliminating debt – is a worthy goal.

Consider two different people, one who pays her credit card balance in full and another whose credit is maxed out. The first lives within her means by choice and the second is forced to live within his means because he can’t tap into credit for more wasteful spending. Both are basically in the same situation, but the first person has significantly more freedom.

Which person has the flexibility to take a much needed vacation or effortlessly handle an unexpected repair bill? The first person could use her credit card for either purpose. That probably isn’t necessary, though. Her lack of debt probably also let her build an emergency fund and perhaps a vacation fund. The second person would be stuck. Since his money was mostly going to the high interest and fees of his credit card, he probably has little savings and no way to pay for either expense. He may have to forgo the vacation and turn to a prohibitively expensive payday loan for the car repair.

The liberation that comes with lower debt extends beyond credit cards. Making a significant down payment on my house did more than allow me to avoid PMI. The equity I started with as a result, plus the additional equity prepaying added, made it so that I didn’t have to worry about declining home prices when it was time to sell. If I had less equity, I might have been forced to stay in that house even though I wanted to relocate.

To accelerate your own plan towards more freedom through lower debt, you can consolidate your existing debt with a P2P loan from Lending Club. By considerably lowering the average interest rate on your debt, you’ll be able to pay it off much more quickly. As your debt melts away, so too will your stress, as freedom returns to your life.

Is a high level of debt restricting your freedom?