Pay off debt or invest: What does the calculation show?
If you have an amount left over each month, you can use it for extra debt payments or investing. The two choices have different risks and affect debt, liquidity and wealth. The calculator compares them with the same payment and the same time horizon.
Worked example
- Remaining debt: 13,000.00 EUR
- Loan interest rate: 4 %
- Remaining term: 120 months
- Extra amount per month: 130.00 EUR
- Return after tax and costs: 6 %
Largest net value at the end date: Investment
Extra repayment 20,156 EUR (the loan is paid off after 55 months) · investment 21,122 EUR
Net value = investment minus remaining debt. The loan interest is certain; the return is not.
Use interest and returns on a comparable basis
The interest rate on the loan must be assessed together with fees and any tax effects. Investment returns must be seen after costs and the chosen tax model. A gross interest rate and a return before tax are therefore not always directly comparable.
An expected investment return is uncertain. The saving from reducing a debt depends on the specific loan terms. The calculator shows economic scenarios rather than pointing to one choice as right for everyone.
Guide to your comparison
Check the terms for extra payments
Find out whether the extra payment changes the term or the payment, and whether it has costs. The freed-up payments must be treated consistently through the rest of the period.
Try a weaker investment path
Calculate with a lower return and a period of losses. At the same time, look at how large a buffer you need outside both debt and investment. A high calculated final amount does not help with a bill if the money is not available.
The result shows net worth and remaining debt at the same end date. Use the debt calculator if you have several loans with different terms. Tax and interest deductions must be checked for your situation before they are used as an assumption in a specific choice.