Investment ROI vs Debt Calculator

Before you go throwing darts on Wall Street, check to make sure you can't earn a higher rate of return simply by investing in your own debt! For example, if you have a credit card balance that's costing you 19% per year, and you increase your payment, you will get a guaranteed 19% return on your investment. What's more, your earnings will be tax-free! So use this JavaScript Calculator to see how much you could be earning if you increased your payment on any one of your debts.

Enter the principal balance owed:
Enter the annual interest rate:
Enter the current monthly payment amount:
Enter a monthly amount to add to the current payment:
Current Payoff Term (Months):
Revised Payoff Term (Months):
Time Saved (Months):
Current Interest Cost:
Revised Interest Cost:
Total interest savings (Return on investment):
Guaranteed Annual Rate of Return:

Determining the Best Times to Invest

Effective debt management requires thinking outside the box, to make sure you are serving your best financial interests.  While lending is based on solid principles, and regulated heavily by watchdog agencies, it is easy to miss the big picture when you are not tuned-in to your financial well-being.  One way investors fall short is by failing to consider the cost of debt.

Debt accumulates over time, covering financing needs for homes and cars, as well as routine purchases. Terms and conditions are not the same on various credit products people utilize, leading to missteps managing money.  Credit cards, for example, capture our attention each month as compulsory payments are required, but we often fail to step back to gain big-picture understanding of how investments and debts work together.

Debt, Interest, and Repayment

In order to grasp your entire financial picture, it's important to look at what you owe and how you repay it.  Since the debt in your credit portfolio comes from various sources, issued at intervals across your life span, it is not always easy to get an accurate assessment without help.  Debt and interest calculators allow you to plug-in important information about loans and credit cards, yielding helpful information for managing repayment responsibilities.

Fixed rates are the easiest to anticipate, since they do not change over the course of a loan's life.  Mortgages and other long-term loans provide incremental profits for lenders, who issue them with 10, 20, even thirty-year payback periods. Since they are collecting interest over the long-haul, fixed rates tied to home purchases are among the lowest available in the credit industry.

Variable rate contracts also include attractive features, like low introductory interest rates, but they are not guaranteed contracts.  In other words, rates are tied to economic indicators, responding to short-term changes in the prime rate.  As a result, future payments and interest rates are uncertain, reflecting changes occurring in financial markets.  For individual debtors, it becomes harder to analyze financial health with each different variable rate debt added to portfolios. To assist, various financial calculators allow consumers to evaluate average interest paid each month.  Others furnish snapshots blending dissimilar interest rates attached to multiple cards, deriving average values for the rates paid.  Another important calculator provides insight into the way interest obligations and investment income work together.

Investment Relationships

Analyzing interest rates and other terms and conditions impacting debt repayment keeps consumers abreast of what they are paying – and when, but the other side of the equation is often ignored.

As debts are paid down and borrowers move through life, investment opportunities divert funds into stocks, bonds, real estate and various securities.  Each investment returns its own yield, based on market performance and other factors.  Generally, stocks and bonds fluctuate in value, so net-worth varies depending on when it is tabulated.  Debt interest changes too, but not always in the dramatic fashion seen with investment returns.  The ebb and flow created by investment returns and debt payments sometimes results in upside-down situations where debts are charging more interest to pay-off than investments are earning. Debt investment calculator helps determine whether or not invested funds would be more cost-effectively applied to outstanding debt payments.