Should I pay off debt faster or invest the extra?
The math is straightforward: if loan rate > expected return, pay off. If return > rate, invest. The threshold is exactly the rate. We show both paths side by side.
How the math works
Two parallel simulations from the same monthly cash flow.
Path A (accelerate payoff): standard amortization PMT = P × r(1+r)n/((1+r)n−1)
with extra payment added every month. Once paid off, the freed-up cash flow gets redirected into investments at the expected return until the planning horizon ends.
Path B (minimum + invest): standard minimum payment for the full term, with the would-be extra payment invested monthly at the expected return. Final value is the investment portfolio plus interest saved.
The decisive variable: the spread between loan rate and expected return. If loan rate > return, Path A wins. If return > loan rate, Path B wins. The threshold is exactly the rate, but Path A's return is guaranteed while Path B's isn't — which matters when the spread is small (under 2-3%).
Math runs locally. Inputs never leave your browser. Source on github.
Scenarios we've already crunched
Common debt situations with the math worked out:
- $5K credit card balance becomes $15K at minimum payments — 22% APR + 2% minimum = 20+ years to pay off. The math on why minimum payments are designed to never end.
- Pay off vs invest: the rate is the threshold — and why "guaranteed return" beats "expected return" when the spread is under 3%.
- $30K student loans at 5%: minimums + invest beats aggressive payoff by $3K — but only if you actually invest the savings every month.