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.
Found another way around this?
Share your steps and trade-offs so fellow engineers don't have to reinvent the wheel. No account required.
- 1Paying monthly installments to clear the balance before the promotional deadlineDid this help you?
- 2Keeping the cash in a high-yield savings account and paying the lump sum right before the zero-interest period expiresDid this help you?
- 3Paying a very large portion of the mortgage while saving the remainder for repairs and investingDid this help you?
- 4Keeping cash liquid for other real estate investments and converting the current home into a rental propertyDid this help you?
- 5Investing extra cash in index funds or the stock marketDid this help you?
- 6Maxing out tax-advantaged accounts like a mega backdoor Roth 401kDid this help you?
- 7Taking a blended approach of investing heavily now and paying down the mortgage laterDid this help you?
- 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.Did this help you?
- 9Comparing the car loan APR against the after-tax yield of cash savingsDid this help you?
- 10Checking remaining cash reserves to ensure the emergency fund and near-term expenses remain adequately funded after a lump-sum payoffDid this help you?
- 11continuing to make minimum monthly auto-paymentsDid this help you?
- 12increasing monthly payments incrementally to pay it off faster without draining savingsDid this help you?
- 13putting savings into higher-yielding accounts to earn more interest than the loan costsDid this help you?
- 14Leaving cash in a high-yield savings account or money market fund earning a higher return than the mortgage rateDid this help you?
- 15Investing excess funds in tax-advantaged accounts like a maxed-out 401k or taxable brokerage accountsDid this help you?
- 16Paying off only half the mortgageDid this help you?
- 17Recasting the mortgage to lower the monthly paymentDid this help you?
- 18Throwing extra cash at the principal monthly instead of a lump-sum liquidationDid this help you?
- 19Keeping funds invested and relying on a long-term compound growth strategyDid this help you?
- 20Building an emergency fund buffer to a minimum amount before making extra paymentsDid this help you?
- 21Working extra hours to pay off the loan quicklyDid this help you?
- 22Paying only the minimum monthly payment for the duration of the loan termDid this help you?
In their words
Unedited, grouped by where they were said, most upvoted first within each place, each linked to the thread it came from.
“Should I eliminate my student loan debt at the cost of cutting my savings in half?”source ↗
“It just hurts cause that’s all my savings that I’ve been saving since the beginning of the year. I just hate having debt.”source ↗
“What should I do? Should I eliminate my student loan debt at the cost of cutting my savings in half?”source ↗
“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 ↗
“My current plan it to pay my $498,000 mortgage off in full when I have to money to do so. I’d really like to retire early if possible as I have been working and saving money since I’ve been 15 years old.”source ↗
“Would any of you do anything differently to optimize anything or have different plans vs paying off my mortgage entirely?”source ↗
“I would certainly consider prepaying the mortgage some, but maybe not liquidate all my non-retirement assets.”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 ↗
“I am seriously considering paying off this balance this week. I have around 125k in cash, and 330k in index funds not in retirement.”source ↗
“If we have a significant crash I worry I will lose my job plus my investments will crash so I can no longer pay off my mortgage.”source ↗
“I'm 19yrs old and the only kind of debt I have rn is my car loan. I have about 10,000 still owed to the bank and my interest rate is 9.89%. I dont have my HYSA for my emergency fund built up quite good yet.”source ↗
“Should I start putting that $800 towards my payment along with the $275.99 minimum payment? Or should I just keep paying the minimum for the rest of the term length?”source ↗
Where this came up
People with this problem also raised
- 7Is it better to pay off credit card debt or keep cash in savings?
- 79Should I pay off debt or start investing and saving?
- 10Should I use my savings to pay off student loans?
- 6Why did I get charged extra interest after paying off my car loan early?
- 6How to pay off multiple small short-term debts and loans efficiently
- 9Should I pay off the smallest debt first?