Should you invest while you’re in debt?

Nicole Sara Sivens
November 1, 2018
7 min read
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Should you invest in your future while you’re still paying off debts from your past? It might seem counterintuitive or even feel just plain wrong – but we know that investing is so, so right. As with most financial matters, it depends on the specifics of you and your situation. Basically, it all comes down to math.

Investing instead of paying off your debts only makes sense if it makes mathematical sense, so ask yourself this: Will you earn more in returns than the interest you pay?

As a starting point, take a look at your personal debts, sort them by debt type and interest rate.

Credit cards

Your credit cards will typically have higher interest rates, more than 20% in some cases, and that interest will compound on your balances carried forward.

If the majority of your debt is credit card debt and your interest rates are higher than 7%, it makes more sense to use your dollars to pay down your debt than invest.


Home loans are usually the largest debt that most of us will ever take on, are typically set at a lower, fixed interest rate. The average rate in the US is currently around 5%.

So if you’re paying 5% toward your mortgage and are able to allocate some of your budget toward investments, then go for it. Of course, it’s not really that simple (financial decisions never are), and there are lots of things to consider: equity, Private Mortgage Insurance fees, appreciation, and your own peace of mind.

Student loans

These are a little bit tougher of a call. The average student loan interest rates are between 5 and 8%, depending on what type of loan you’ve got. The average student loan debt is just under $40,000 with a $350 monthly payment.

It may make sense, mathematically, to invest your excess funds instead of using them to pay down your debt, but here’s the thing: The only one who can decide that is you.

Paying off your loans can be a huge accomplishment and provide a tremendous sense of satisfaction, but don't forget to think critically and run the numbers. Money put aside could grow into a comfortable retirement fund, while a fully paid off debt won’t do much for you in your golden years.

For many, the idea of putting money toward anything, even their own future goals, might seem unethical while owing money to anyone. For others, they may have decided long ago that student loans, mortgages, and credit debts will just be a part of their lives forever and don’t really see the point in paying them down.

Like most financial decisions, there’s no one just-right answer for everyone and personality plays a huge role.

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