 TITLE: Will Paying Off a Loan Improve Credit? CONTENT: Should You Pay Off Debt Early or Continue Making Payments?\n----------------------------------------------------------\nSince your credit score may not improve if you pay off a loan early, it's natural to wonder whether you should prioritize debt payoff at all.\nFirst, make sure you have enough emergency savings to carry you through a potential period of unemployment or other unforeseen event. Ideally, you'll have three to six months' worth of basic expenses saved at all times—which means avoiding dipping into savings to pay off debt.\nIf you have a robust emergency fund, however, and you're saving for other goals like retirement and perhaps a down payment on a home, then you may decide to use extra funds to pay off a loan. There are several reasons why getting debt-free is a goal worth working toward, whether or not you'll experience a credit score boost afterward.\n*   **Lower debt-to-income ratio**: When you pay off debt, your debt-to-income ratio (DTI) decreases, since you now have smaller monthly debt payments compared with your income. That's one of the primary factors financial institutions use to make mortgage lending decisions, for instance, so if you're in the market for new credit in the future, lowering your DTI could be valuable.\n*   **Interest savings**: The moment you pay off a personal loan that carried an interest rate of 9%, for instance, you'll get access to the money you were previously putting toward your monthly bill. You can allocate the money you were previously paying toward other debt or toward savings.\n*   **Peace of mind**: Debt can feel like a cloud hanging over you, especially when it's keeping you from pursuing goals you're passionate about. Eliminating a monthly debt payment from your budget gives you innumerable new possibilities for making use of that money. Celebrate when you pay off a loan; the flexibility and freedom you'll now feel can be priceless.\nOne more thing to consider: A personal loan might not be the best debt to prioritize if your goal is becoming debt-free and saving money. Generally, loans carry a lower interest rate compared with other types of debt, such as credit cards. Before you decide to pay off a loan, take a look at your other debts. It might save you more money overall if you focus on the debt with the highest interest rate. END