Pay down debt or invest?
If you've got spare cash each month, is it better to overpay your debt or invest the difference? Paying debt earns a guaranteed return equal to its interest rate; investing earns an uncertain one. This runs both strategies over the same budget and time, so you can see the gap in pounds.
Your numbers
Two strategies, same £/month
Worth knowing
One pot of spare money, two claims on it
Every pound overpaid on a 9% debt earns you exactly 9%, guaranteed, tax-free, with no fund manager involved. That single sentence does most of the work in this decision. Investing the same pound might return more, and some years it will, but the debt's rate is the hurdle your investments have to clear just to break even, and they have to clear it after fees, after tax outside an ISA, and through whatever the market does along the way.
The default case, and the honest tie
£12,000 of debt at 9%, £300 spare a month, an assumed 6% investment return: overpaying first leaves you £933 better off over ten years, and the win is banked with certainty rather than hoped for. Push the assumed return above 9% and the strategies tie, then flip. That's the whole model, and it's worth being suspicious of any assumption that conveniently clears your own debt's rate. Two genuine exceptions run the other way: an employer pension match is free money at 50% to 100% and beats any normal debt, and a small emergency fund comes before extra debt payments, because without one the next surprise lands straight back on the credit card at 22%.
Rate by rate, the order sorts itself
Card debt at 20-plus percent: pay it down, nothing sensible competes. Mortgages at 4-something percent: genuinely contested territory, where the maths says investing edges it and temperament casts the deciding vote. Student loans play by such different rules that they get their own tool: the student loan overpayment calculator regularly concludes that overpaying is a donation. And when the debts are gone, the investment calculator shows what the freed-up payment builds next.
Common questions
Should I pay off debt or invest?
Compare the interest rate on your debt with the return you realistically expect from investing. If the debt costs more than you would earn, clearing it first usually wins. The calculator shows both paths side by side.
Why is paying off debt like a guaranteed return?
Clearing a debt that charges, say, 7% saves you that 7% for certain, whereas investment returns are uncertain and can be negative. That guaranteed saving is why high-interest debt usually comes first.
Does an employer pension match change the answer?
Yes. A pension contribution that your employer matches is an immediate return that no debt repayment can beat, so it is usually worth capturing the full match before overpaying debt.
These results are estimates for general information only and are not financial advice. Check every figure yourself and seek appropriate advice from a qualified professional before making any decision. Read the full disclaimer.