Should I Pay Off Debt or Invest?

When you receive some extra money it may be difficult to determine whether you should invest the funds or use them to retire debt. Financial theory recommends that if your after-tax return on investments is greater than your after-tax cost of debt then you should invest and take advantage of the rate spread. Keep in mind, however, the inherent riskiness of the investment you select (ie you may lose the money you invest yet still have obligations to pay back the liability). Use this calculator to help analyze your situation.
     
  Rates and Assumptions

Input
  Interest rate on debt: (%)
Is the interest deductible? No   Yes
Before tax return on investment: (%)
Is the interest taxable? No   Yes
Marginal tax bracket: (%)
     
 

Any rate of return entered into the calculator to project future values should be a reasonable average return for the period. Rates of return will vary over time, and generally the higher the rate of return the higher the degree of risk.

The information provided here is to assist you in planning for your future. The accuracy of this calculator and its applicability to your circumstances is not guaranteed. Any analysis is a result of the information you have provided. Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please not that individual situations can vary. Therefore, the information should be relied upon when coordianted with individual advice from qualified professionals.