Debt vs Investing Calculator
Compare paying debt first vs investing while paying minimums.
Who This Is For
If you have extra money each month and aren't sure whether to put it toward debt or invest it, this calculator models both scenarios. It's a common dilemma with no one-size-fits-all answer.
Example Scenario
You owe $10,000 at 18% APR with $300/month extra to allocate. Expected market return: 7%. Over 5 years, paying debt first leaves you with a higher net worth because the 18% guaranteed return from eliminating interest beats expected investment returns.
At a 5% debt rate and 7% expected return, investing pulls ahead. Try your own numbers to see where the crossover is.
How It Works
This calculator compares two strategies:
- Pay Debt First: Apply extra cash to debt, then invest after payoff
- Invest While Paying Minimum: Invest extra cash while paying minimum on debt
The result shows which strategy results in higher net worth at your target horizon.
Assumptions and Formula
Assumptions used in this model:
- Debt APR and expected investment return are constant.
- Monthly extra cash is deployed consistently for the full horizon.
- Returns are pre-tax and do not model volatility or sequence risk.
Comparison formula: ending net worth = investment value - remaining debt in each scenario, then compare both ending net worth outcomes.
How to Interpret Your Results
| Signal | What It Means | Action |
|---|---|---|
| Debt-first wins by a wide margin | APR is effectively a high guaranteed return | Prioritize payoff before major investing |
| Investing wins only at long horizon | Compounding needs time to dominate | Use phased plan: debt cleanup then invest |
| Outcomes are close | Behavior and risk tolerance matter most | Choose the plan you can maintain consistently |
Frequently Asked Questions
Deep Dive Guide
Read the debt vs investing framework
Decision framework for rates, risk, cash buffer, and timelines.