Compare the after-tax cost of your debt to the after-tax return on your investments
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If you find yourself with some extra money, should you pay down debt or invest?
If you have a high level of debt and are struggling to make your monthly payments, or if your debt is mainly high interest rate credit card debt, then you should pay down your debt.
If you have your debt under control and the debt is made up of lower interest rate loans, two variables should be considered.
- The after-tax rate you are paying on your debt
- The after-tax rate of return you expect to make on your investments.
Pay Down Debt or Invest Calculator