Pay off a loan or invest? One number decides
You have spare money and cannot decide whether to throw it at debt or invest it. This overview shows which two numbers decide, and what else enters the comparison.
This text was created or edited with the help of artificial intelligence and passed human editorial review before publication. Always verify figures, prices and terms against the current conditions of the specific provider.
What to weigh up
- Paying off debt is a risk-free return equal to its interest rate — known in advance, unlike an investment return.
- So two numbers are compared: the interest on the debt and a realistic expected after-tax return on the investment. Which of them is higher in your case?
- On expensive consumer loans and credit cards the first number tends to be so high that an ordinary investment will not beat it. Do you know the rate you are actually paying?
- The reserve enters the decision too — an extra payment that leaves you without a cushion can push you back to more expensive debt. What would you do if an unexpected expense arrived a week later?
Try it yourself
Step 1 of 4
What type of debt are you dealing with?
What to work out before you decide
- 1.The exact rate on each debt (APR) and their order from most expensive. The comparison cannot be made without it.
- 2.A realistic expected after-tax return on the investment — not the return from last year's good run.
- 3.How much of the reserve would be left after the extra payment. That number often decides before the interest gap does.
You can live through this decision
In the “Your own home” track you reach the same choice — and see where it takes you a few years on.
This is not financial advice. Numbers are illustrative and for educational purposes only. Always verify current conditions with your provider before making any financial decision.