Unlock Full Control with Our Free Excel Calculator
Need to run advanced simulations or customize your debt payoff strategy? Download the free Excel spreadsheet version to:
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Adjust unlimited variables – model different interest rates, loan terms, and contribution amounts
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Save multiple scenarios – compare side-by-side and track progress over time
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Work offline – access your financial projections anytime, anywhere
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Fully editable formulas – tailor calculations to your unique situation
How to Use the Invest vs Repayment Calculator
This free loan repayment vs investment calculator helps you decide whether to pay off debt faster or invest your extra money. Enter your financial details to compare three strategies side by side.
Step-by-Step Instructions:
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Debt Value: Enter your total outstanding loan balance (e.g., mortgage, student loan, car loan).
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Debt Interest Rate: Input the annual interest rate on your debt.
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Savings/Investment Interest Rate: Enter the expected annual return on your investments.
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Monthly Contributions: Specify how much extra money you can allocate each month.
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Time Period: Set the original loan term in years.
Understanding the Three Scenarios
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Scenario 1 – Repayment Only: All extra contributions go toward paying off your debt faster, reducing total interest paid.
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Scenario 2 – Invest All Extra: All extra money is invested while making minimum debt payments, maximizing potential investment growth.
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Scenario 3 – Pro Tip X Formula: A balanced approach that splits contributions proportionally based on your debt and investment interest rates for optimal results.
Inspired from The Money Game
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Mark’s Case: When “Being Careful” Still Costs You Money
The Math Behind Mark’s Decision
1. Two Interest Rates, Two Opposite Effects
Mark had:
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A mortgage charging 6% per year
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A savings account paying 1% per year
That means:
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Every extra dollar kept in savings earned 1%
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Every extra dollar left on the mortgage cost 6%
From a math perspective, this is a 5% negative spread working silently every year.
2. What the Mortgage Actually Costs
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Mortgage amount: $500,000
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Interest rate: 6%
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Term: 25 years
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Monthly payment: $3,222
Total paid over 25 years: $966,452
Total interest paid to the bank: $466,452
Almost half a million dollars went purely to interest.
3. What the Savings Actually Earned
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Monthly savings: $1,000
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Interest rate: 1%
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Time period: 25 years
Total interest earned: $40,670
This means that while the mortgage interest was compounding aggressively at 6%, the savings were barely growing.
4. The Hidden Opportunity Cost
By saving at 1% instead of reducing debt at 6%, Mark effectively:
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Paid high interest on money he could have eliminated
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Earned low interest on money that could have reduced that cost
Each dollar sent to savings instead of early repayment had a guaranteed 6% cost, not a neutral outcome.
This is not a risk-based decision.
It’s a mathematical certainty.
5. Why Partial Early Repayment Changes Everything
If Mark had redirected even half of his monthly savings toward early repayment:
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The mortgage balance would have fallen faster
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Interest would have been calculated on a lower principal
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The loan would have ended earlier
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Cash flow would have been freed sooner
Only after expensive debt is reduced does saving at low interest start making mathematical sense.
6. The Core Principle
Money must be optimized across the entire balance sheet, not evaluated in isolation.
If:
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Debt grows faster than savings
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And both exist at the same time
Then the system is leaking value—even if it feels safe.
This is why “saving more” is not always the same as “building wealth faster.”