Loan payoff vs invest
Crush the loan, or feed the index? The math, not the vibes.
Putting extra money toward debt feels good. Investing it might compound harder. Both can be right depending on the rate. Here's the comparison — at the same horizon, with the same total cash flow.
What the extra payment buys you
Pay it down
$33,772
at 10.2-year horizon
$4,807 interest saved
61 months sooner debt-free
Invest the extra at 7%
$34,059
at 10.2-year horizon
$4,451 interest paid (vs. $9,258)
Verdict
Invest-extra wins by $287 at the 10.2-year horizon.
Above ~7% APR, paying down typically wins. Below it, investing usually does. Not advice — that's your call.
How the comparison works
- Both strategies use the same monthly cash flow: $480 (min + extra).
- Pay-down: all of it goes to the loan until it's gone (5.1 years), then the same amount goes into the market for the remaining 5.1 years.
- Invest-extra: only the minimum goes to the loan (10.2 years to payoff); the extra goes into the market the whole time.
- Market return assumed at 7% a year (broad US index long-run average). Past performance doesn't guarantee future results.
Talk through what's right for you