How do you compare paying off a loan early vs. investing fairly?

Both scenarios must use the exact same monthly out-of-pocket budget. In the Pay Off scenario, once the loan is eliminated early, the freed-up monthly loan payment is redirected into investments for the remaining months of the original loan term.

What is the break-even investment return?

The break-even return is the pre-tax annual investment return required for your investment portfolio (after capital gains tax) to equal the net worth achieved by paying off your loan first.

Pay Off Debt vs. Invest Calculator

Should your extra cash go toward your loan principal or into investments?

1. Your Current Loan

Remaining Loan Balance ($)

Loan Annual Interest Rate (%)

Remaining Term (Months)

2. Extra Cash & Expected Investment Return

One-Time Extra Lump Sum ($)

Extra Monthly Budget ($)

Expected Annual Return (%)

Capital Gains Tax (%)

Comparison Result

Option A: Pay Off Loan First, Then Invest

Option B: Keep Loan Schedule & Invest Extra Cash

Base required monthly loan payment:

Option A: Pay Off Loan First

Debt-Free In:
Total Loan Interest Paid:
Guaranteed Interest Saved:
Final Net Worth (After Tax):

Option B: Invest From Day 1

Debt-Free In:
Total Loan Interest Paid:
Pre-Tax Investment Gains:
Final Net Worth (After Tax):

Next Step

View Full Exact-Day Amortization Schedule

Open this loan in our month-by-month amortization table with custom prepayment dates.

Next Step

Can you refinance to a lower interest rate?

Check your break-even month and total savings with our Refinance Calculator.

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Year-by-Year Balance & Portfolio Progression

Year	Pay Off: Loan Balance	Pay Off: Investment	Invest: Loan Balance	Invest: Portfolio	Net Advantage (Invest − Pay Off)

Generated with finanzapy.com — Free Financial Calculators

Frequently Asked Questions

A fair comparison requires identical total monthly cash outflow in both scenarios. In Option A (Pay Off First), all extra money goes toward eliminating the loan early; once the loan hits zero, the entire freed-up monthly loan payment plus your monthly extra is invested until the end of the original loan term.

Because investment gains are often subject to capital gains tax while interest saved on a personal loan or mortgage is tax-free, your investments usually need to earn a higher pre-tax return than your loan's interest rate to come out ahead.