Loan vs Investment Calculator
Compare using spare cash to repay a loan against investing it, and see which one leaves you better off after tax.
Enter your numbers
Example: 100000
Example: 12
Example: 12
Example: 8
Example: 10
Recent
Formula
How the calculation works
Enter the spare cash, your loan's annual interest rate and its remaining months, then your expected investment return and the tax rate on that return.
The tool computes the interest you avoid by repaying early and the after-tax profit the same money would earn if invested for the same period.
It compares the two and names the option that leaves you ahead, so you can decide with numbers instead of a hunch.
Common mistakes
- Comparing the raw investment return with the loan rate while forgetting the tax on the investment income, which flatters the investment side.
- Ignoring the loan period, because a long remaining tenure makes repayment savings much larger than a short one.
When to use it
- Use it when you receive a bonus or maturity amount and must decide whether to clear the loan or invest.
- Use it to test whether your investment return truly beats the interest you pay on the loan.
Worked example
With Tk 1,00,000 to spare and a loan at 12 percent for 12 months, repaying saves Tk 12,000 in interest. Investing at 8 percent earns Tk 8,000 gross, and after 10 percent tax the net is Tk 7,200, so repaying the loan is better by Tk 4,800.
Common questions
Should I always repay the loan if its rate is higher?
Usually yes, because a loan rate higher than your after-tax investment return means repaying gives a guaranteed saving larger than the risky investment gain.
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