Pay Down Debt or Invest Calculator

If you have extra money, this calculator helps you decide whether to invest or pay off debt.

Your loan:

Interest rate on your loan:

Compounding period:

Make your money grow faster by reinvesting all the money you earn. Changing how often your money compounds, changes your results.

Marginal tax rate on your income:

Tax paid on each extra dollar of income earned; rate is based on income level. Different rates apply to interest, dividends and capital gains.

Is your loan tax deductible?

Tax on debt is deductible if used for business and/or investing.

Your investment:

Marginal tax rate on your investment:

Investments in registered accounts (e.g., RRSP or RESP): returns are not taxable until withdrawn, so enter "0." Investments outside registered accounts: returns are taxable in the year they're earned.
Capital gains are taxed when the investment is sold; the capital gains inclusion rate is 50%, so enter half your marginal tax rate. Interest is taxed at your marginal rate, so enter that same number. Dividends are taxed based on
their type.

Results

Your break-even rate:

Your break-even rate is . The break-even rate is what your investment must earn – before tax, if applicable – to match the return from using your money to reduce debt. If you don’t think your investment can beat the break-even rate, it’s normally better to pay down your loan.

Strategies to pay down debt.

Any results or calculations displayed on this site are made available for information purposes only, and do not constitute financial or legal advice. By using this calculator, you agree to our Website and Social Media Terms of Use and Privacy Policy.

Assumptions

Expand Close

The break-even rate is an effective rate, not a nominal rate. The effective rate depends on the compounding frequency of the loan. The higher the compounding frequency, the higher the effective interest rate will be for a given nominal interest rate.

A nominal rate, or annual percentage rate (APR), represents the total cost of a loan or other debt each year as a percentage. This is the number that you will typically see reported as the interest rate for the loan. If your loan compounds annually, the effective rate for the loan is the same as the nominal rate.