§ Calculator · Debt
Cost of debt
What this is
The real cost of carrying debt isn't just interest. It's also the investment return you're giving up.
Two costs stacked: (1) interest you pay each year, and (2) the FV you'd have if that money had been invested instead. A $20k card balance at 18% costs $3,600/yr in interest AND ~$1,400/yr in foregone investment returns.
Annual interest
$3,600
Interest over horizon
$36,000
Opportunity cost
$19,343
Total cost
$55,343
The opportunity-cost framing argues for paying off high-rate debt before investing. Rule of thumb: pay off anything above your expected investment return, invest above your highest debt rate.
Disclaimer
Educational, not financial advice. Output is generated by an AI assistant using simplified assumptions. Tax rates, contribution limits, and benefit amounts change annually; confirm with a CFP, CPA, or the relevant Canadian regulator (CRA, FSRA, OSC, IIROC) before acting.