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Paying off a loan that has 6% annual interest is mathematically equivalent to investing money that has 6% guaranteed return. When you look at it that way it's a
by njwi332 10y ago
Paying off a loan that has 6% annual interest is mathematically equivalent to investing money that has 6% guaranteed return. When you look at it that way it's a great incentive to pay off debt
- ptype 10y agoExactly, and actually if you take tax rate into account it looks even more appealing, e.g. if your marginal tax rate is 50% (as it is sometimes in Europe) you would have to earn 12% on your money before it is more beneficial than paying down your mortgage/loan. Hard to beat that Sharpe.