When It’s Not Worth It to Pay Off Your Debt

Written By Guest Post
Last updated January 27, 2021

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June 12, 2015

Simple. Thrifty. Living.

If you’re in debt, you may want to pay it off as quickly as possible. In some cases, though, prepaying your debt has no financial benefits and may actually hurt you financially. In these cases, you should let the debt ride while paying the minimum.

Mortgage debt is an example of a debt that often doesn’t do you any good to prepay. There are several reasons why you might want to hold off on paying down your mortgage:

  • Mortgage interest payments are tax deductible. If you prepay your mortgage rather than paying it off for years to come, you could miss out on significant tax savings.
  • The equity in your home might not be as good an investment as others you could be putting that money into. If you pay down your mortgage instead of investing extra money in your retirement portfolio, you might end up with fewer assets in the long run.

Before prepaying a mortgage, you should discuss your options with your financial planner and determine whether it is in your best interest to do so rather than investing the money elsewhere.

Some debts don’t reduce interest payments if you prepay. For example, if you prepay a student loan, you still have to pay the same interest on your principal as you would if you made standard monthly payments for 10 years. In these cases, there’s no special advantage to paying early because you end up paying the same amount. If you are on reduced payments because of economic hardship, this may not hold true. Check with your financial adviser.


If you are going to pay the same amount whether you pay all at once or over 10 years, you might as well take your time to pay and put extra money in a high-yield savings account so that you have a financial cushion while you are repaying your debt.

Many people don’t realize how important carrying debt is to your credit score. If you are in too much of a hurry to pay off your debt, you can end up lowering your score. Creditors want to see that you have handled revolving debt well over time, not that you paid back your debt once and never took out a loan again. Otherwise, they have no proof that you will pay back your new debt in a timely manner.


You should use your credit card when you have the chance, pay it off every month and then use the card again instead of paying your card in full once and never using it again. That way, you can demonstrate that you are consistently responsible about paying back loans. Also make sure that you are getting the best rewards from your credit card so you can earn some cash back in addition to advancing your credit score. Here are some of the best credit cards with rewards.

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