Should you pay off debt or invest extra cash? This calculator compares two paths over your chosen time horizon. Paying debt provides a guaranteed return equal to your interest rate, while investing offers uncertain but potentially higher long-term growth.
How to use this calculator
- Enter your current debt balance and interest rate.
- Enter the minimum payment and extra monthly amount you could allocate.
- Enter expected investment return and time horizon in years.
- Review debt-first vs invest-first outcomes and the recommendation.
Formula
The debt-first path applies your extra payment to debt until it is cleared, then invests the freed payment. The invest-first path pays only minimums on debt while investing the extra amount each month. Net outcomes compare ending investment value minus any remaining debt.
Example
With $10,000 at 8% and $300 extra per month over 10 years, paying debt first may win when your debt rate exceeds expected investment returns. If expected returns are higher, investing may look better on paper—but with more risk.
Frequently asked questions
- When is paying debt better?
- When your debt interest rate is higher than expected investment returns, extra payments toward debt usually provide a better guaranteed return.
- What are the risks of investing instead?
- Investment returns are not guaranteed and can fluctuate. Debt interest, by contrast, is a known cost until the balance is paid off.
- Should I ignore employer 401(k) match?
- Many planners suggest capturing full employer match first because it is immediate return. This calculator compares generic debt vs invest tradeoffs and does not model match rules.