§ 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.
Pay off the debt, or invest the same money? Weigh the interest you pay against the return you’d earn investing it instead. The net cost of carrying is the interest minus that forgone growth: a positive number means paying off wins; a negative number means investing comes out ahead. A $20k balance at 18% pays $3,600/yr in interest.
Annual interest
$3,600
Interest over horizon
$36,000
Opportunity cost
$19,343
Net cost of carrying
$16,657
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.