You have spare money each month. Do you throw it at the loan or into the market? The maths is simple. The decision is not.
The mathematical answer
Repaying debt is a guaranteed, risk-free, tax-free return equal to its interest rate. Paying off a 9% loan earns you a certain 9%. No investment offers a certain 9%.
So compare your interest rate against the return you might get, adjusted for the fact that "might" is doing a lot of work:
- Above ~8% (credit cards, consumer loans, overdrafts) — repay. This is not close. A guaranteed 15% beats a hoped-for 7% every day.
- Under ~4% (a cheap fixed mortgage, a subsidised student loan) — investing has historically won over long periods. Repaying is still not wrong; it is just probably suboptimal.
- In between — genuinely a toss-up. This is where personal factors decide it.
What the maths leaves out
Debt has a psychological weight that no spreadsheet captures. People with loans sleep worse, take fewer career risks, and — crucially — panic-sell investments during downturns because the debt makes them feel exposed.
If clearing a 5% loan means you will actually stay invested through the next crash, clearing it may beat the theoretically optimal path. A slightly worse plan you follow beats a perfect plan you abandon.
Three things that settle it
- Take the employer pension match first. Always. An immediate match is a return no loan rate competes with.
- Emergency fund before extra repayments. Otherwise the next surprise goes back on the card you just cleared.
- Is the rate fixed or variable? A variable rate is a moving target — repaying is also buying certainty.
The order that works for most people
Small emergency buffer → employer match → clear anything above ~8% → build the full emergency fund → then split spare cash between investing and any remaining mid-rate debt in whatever ratio lets you sleep.
Summary
High-rate debt is not a financial decision, it is an emergency. Low-rate debt is a genuine choice where psychology is allowed a vote — and often should win it.