💰 2026 Personal Finance · Free

💰 Pay Off Debt or Invest?

Get the math-backed answer in 30 seconds. Compare the guaranteed return from paying off debt vs. expected investment returns over your time horizon.

Your Debt

Credit cards, personal loans, car loans — combined.
Credit cards ~20-29%, personal loans ~10-15%, car loans ~7-9%.
After covering minimum payments + living expenses + emergency fund.

Investment Assumptions

S&P 500 historical average ~10% nominal, ~7% after inflation.
Federal + state/provincial. Investment gains are taxed when sold.

Frequently Asked Questions

Should I pay off debt or invest first?

Pay off debt first if your debt interest rate is higher than your expected investment return (after tax). Investing first makes sense if your debt rate is low (under ~5%), you have a long time horizon, and you can capture employer 401(k) match (free money). Most people benefit from doing both — at minimum match, then attack high-interest debt.

What debt should I pay off first?

Use the avalanche method: pay minimums on everything, then throw all extra cash at the highest-interest debt. Mathematically optimal. The snowball method (smallest balance first) is psychologically easier and works almost as well — pick whichever keeps you motivated.

What is a good debt-to-income ratio?

Under 36% is healthy (most lenders' threshold for mortgages). 36-43% is manageable but tight. Above 43% is a financial red flag. Calculate: total monthly debt payments / gross monthly income × 100.