Should I pay off zero interest debt early or keep the cash in savings?
Keeping cash in a high-yield savings account earns interest while the loan sits at zero percent, but carrying a balance creates ongoing mental stress. This conflict forces a choice between mathematical optimization and the peace of mind that comes from eliminating the debt entirely.
What people tried
Every workaround mentioned in the threads below. We haven’t tested any of them — and nobody here is claiming they worked.
- 1Paying monthly installments to clear the balance before the promotional deadline
- 2Keeping the cash in a high-yield savings account and paying the lump sum right before the zero-interest period expires
- 3Paying a very large portion of the mortgage while saving the remainder for repairs and investing
- 4Keeping cash liquid for other real estate investments and converting the current home into a rental property
- 5Investing extra cash in index funds or the stock market
- 6Maxing out tax-advantaged accounts like a mega backdoor Roth 401k
- 7Taking a blended approach of investing heavily now and paying down the mortgage later
- 8Placing the cash equivalent to the debt balance into a high-yield savings account and setting up automated monthly payments to clear the balance right before the promotional period ends.
- 9Comparing the car loan APR against the after-tax yield of cash savings
- 10Checking remaining cash reserves to ensure the emergency fund and near-term expenses remain adequately funded after a lump-sum payoff
In their words
Unedited, most upvoted first, each linked to the thread it came from.
“Should I just go ahead and pay it off in full so I don’t have to think about? Or should I make payments of about $375 a month or more to make sure it’s paid off before the interest kicks in?”source ↗
“I hate having this debt. But I hate seeing my HYSA drop too. Thoughts?”source ↗
“Math says keep it since it's 0%, but there's a mental component and if paying off a loan will make your life simpler and less stressful, have at it.”source ↗
“We have enough money to pay off our entire mortgage which is $155,000 and still have a little left over. Would it be smart to do that or pay a very large portion and save the rest for repairs and investing. Our current rate is 4.2%”source ↗
“I'm trying to decide how/if I should pay down on my mortgage early.”source ↗
“I'm trying to figure out if I should pay down on the mortgage or finish maxing out the Roth 401k or something else, I just hate looking at the amount of interest I pay over the lilfe of the loan.”source ↗
“I'm getting paid 32k from a disability lawsuit and have 20k of debt currently, all of the cards with a balance are 0% APR. I'm toying with the idea of putting all of it into a HYSA/brokerage until the APR kicks back up as opposed to just paying it all off.”source ↗
“I would love to remove this debt from my monthly bills and i’m considering paying it off so I don’t have to worry about it.”source ↗
“I have a little over $100K in emergency funds so there is a cushion but not sure if i should keep making payments or pay it in full and never have to think about it again.”source ↗
Where this came up
People with this problem also raised
- 18Should I pay off debt or start investing and saving?
- 5Should I use my savings to pay off student loans?
- 2Why did I get charged extra interest after paying off my car loan early?
- 5Should I pay off the smallest debt first?
- 3Should I drain my savings to pay off a car loan?
- 34Why minimum payments don't lower high-interest credit card debt