Pay Off Debt vs Invest Calculator

About this calculator

Extra cash at the end of the month can go toward paying down debt faster or toward building an investment portfolio — and the two paths compete for exactly the same dollars. Paying debt down early delivers a guaranteed, risk-free return equal to the debt’s interest rate, since every dollar of principal you eliminate is a dollar of interest you will never pay; investing instead offers a return that is potentially higher over the long run but uncertain, since it depends on how markets perform.

What tips the decision one way or the other is the spread between the debt’s rate and a realistic expected investment return, the tax treatment on each side (an employer 401(k) match or tax-advantaged account can make investing win even against high-rate debt, while mortgage interest deductions can lower the effective cost of that debt), how much risk and volatility you can tolerate, how soon you might need the cash back, and the simple psychological value some people place on being debt-free.

This calculator takes your debt balance and interest rate, an assumed investment return, and the extra monthly amount you can put toward either goal, then compares month by month how your net worth grows under each strategy.