Pay down debt or invest
Paying down debt gives you a guaranteed, tax-free return equal to the loan's interest rate. Investing gives you an uncertain return, minus tax. See which side wins with your own numbers.
The investment return is an assumption; the interest saving isn't. So when the result is close, that favors paying down debt.
Die Erklärung dazu steht in der Lektion Expensive debt first.
Frequently asked questions
Why can't a debt payoff's return be compared directly to an investment return?
Because it's guaranteed and tax-free, while an investment return is uncertain and taxable.
What gross return would an investment need to beat an 8 percent loan?
At roughly 26 percent tax on investment income, about 10.8 percent, and guaranteed at that.
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