Every euro you have can do exactly one job: kill debt that costs you a guaranteed interest rate, or buy investments with a merely expected return. The comparison sounds hard but is one of the cleanest in personal finance — once you tax the investment return properly. Enter your numbers and this calculator applies the classic decision hierarchy, shows how fast you could be debt-free, and what a portfolio would look like over the same months instead.
By Kestutis Balciunas · Last reviewed: 17 July 2026 · Figures and rules are 2026-vintage estimates — verify current data before acting. Educational tool, not advice.
The decision hierarchy the calculator applies
Step 0 — non-negotiables. Minimum payments on every debt, always (missed payments cost fees, rate hikes and credit damage no spreadsheet captures), and a starter emergency fund first — without one, the next surprise bill lands on a credit card at 20%, undoing everything. Money market ETFs are a reasonable home for that buffer once it outgrows the current account.
Step 1 — the core comparison. After-tax expected return = expected return × (1 − tax). At the default 7% return and 20% tax, that is 5.6%. If your debt rate is higher, paying it down is a guaranteed win that no diversified portfolio can reliably beat — an 8% consumer loan repaid is an 8% risk-free, tax-free return.
Step 2 — cheap debt. Below roughly 3–4% (some mortgages, subsidised student loans), the expected edge of investing is wide enough that markets have historically beaten it comfortably. Keep the minimums, invest the rest.
Step 3 — the grey zone. Between those lines, the math is a coin flip, and a 50/50 split is the honest answer: half the money buys a guaranteed saving, half keeps market upside, and you avoid regret in either scenario.
A worked example
€15,000 of debt at 8%, €400/month available, 7% expected return, 20% tax. After tax the investment offers 5.6% against a guaranteed 8% cost — pay the debt. Sending all €400 to it clears the balance in 44 months, paying about €2,318 of interest. Investing the same €400 for those months would build roughly €19,600 gross — but only €2,318 of that is gain before tax (€1,855 after), while the untouched debt kept compounding at 8% the whole time. The amortization formula behind the payoff time is n = −ln(1 − B·i/P) ÷ ln(1+i), with B the balance, i the monthly rate and P your payment — the same annuity math as our compound growth calculator, run in reverse.
When the payment cannot win
If your monthly amount does not even cover the interest (P ≤ B×i), the balance grows forever no matter what you do — the calculator flags this instead of showing a payoff date. That situation calls for restructuring, rate negotiation or debt consolidation before any investing conversation makes sense.
Beyond the spreadsheet
Two honest caveats. First, dispersion: the debt rate is certain, the investment return is not — which is why the tool leans conservative in close calls. Second, psychology cuts both ways: some people need the debt-free milestone to stay motivated, others need to start investing early to build the habit — a €50 ETF plan running alongside an aggressive payoff, as we suggest in the first-salary ETF plan, often beats a mathematically pure answer nobody sticks to. For the special case where the debt is your mortgage, the trade-offs shift — see the mortgage vs invest guide for Europe. Assumed returns and the 20% tax default are illustrative — verify your country’s current rules. Not financial advice.
These numbers make more sense with the guide
The free 12-page Starter Kit turns them into decisions: your first fund, a safe broker, and the tax basics for your country.
Frequently asked questions
Q: Why compare the debt rate with the after-tax return, not the headline return?
A: Because investment gains are taxed and debt interest is paid from money you keep entirely. A 7% expected return becomes 5.6% after a 20% capital-gains tax, while repaying an 8% loan saves you the full 8%. Comparing headline return with debt rate flatters investing and is the most common mistake in this decision.
Q: Is paying off debt really a guaranteed return?
A: Yes — the truest one available to a retail investor. Repaying €1,000 of an 8% loan saves you €80 of interest next year with absolute certainty, tax-free. No stock, bond or ETF offers a guaranteed 8%; when your debt rate beats the after-tax expected market return, the debt is the better ‘investment’.
Q: Should I invest at all while I still have debt?
A: Above the after-tax return threshold, mathematically no — but keep minimum payments and an emergency fund regardless, and a small habit-building position (say €25–50 a month into a broad ETF) is a defensible exception. For cheap debt under roughly 3–4%, investing alongside the minimums is usually the better plan.
Q: What does the ‘payment doesn’t cover interest’ warning mean?
A: It means your monthly amount is less than one month of interest on the balance, so the debt grows even while you pay. No payoff date exists at that payment level. Fix the structure first: negotiate the rate, consolidate to a cheaper loan, or raise the payment — investing is off the table until then.
Q: Does this work for mortgages too?
A: The core math is identical, but mortgages add wrinkles: rates are usually low enough to land in the grey zone or the invest zone, overpayment penalties may apply, and some countries give mortgage-interest tax relief that lowers the effective rate further. Use the dedicated mortgage overpay vs invest calculator for that case.