Pay Off Debt vs Invest Calculator
Decide whether to pay off debt early or invest the extra money based on rates and returns.
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Frequently Asked Questions
Should I pay off debt or invest?
The mathematical answer: if your debt rate exceeds expected investment returns, pay off debt. If investment returns exceed debt rate, invest. In practice, the break-even is around 6-7%. Credit card debt at 20%? Pay it off. Mortgage at 6.5% and stock market returning 9%? The math slightly favors investing, but emotional factors matter too.
Does paying off debt count as an investment?
Paying off a 10% interest rate loan is equivalent to a guaranteed 10% return — better than most investments after tax and risk adjustment. High-interest debt payoff is often the highest "return on investment" available, especially when accounting for the guaranteed, risk-free nature of the return.
What debts should I always pay off before investing?
Always pay off: credit cards (15-25% APR), payday loans (300%+ APR), personal loans above 8-10%, and private student loans above 7%. The minimum threshold varies: some say pay all debt over 5-6% before investing; others say capture employer 401k match first (it's a 50-100% instant return) regardless.