Real Cost of Debt Calculator
See the true cost of your debt — total interest paid, time to payoff, and the opportunity cost of not investing that money.
The sticker price of debt is just the beginning. Credit card debt at 22% APR means you pay $220/year for every $1,000 you carry — and that's before compounding. This calculator reveals the full picture: how much interest you'll pay, how long it takes to become debt-free, and what your money could have earned if invested instead. Understanding the real cost of debt is the first step toward eliminating it.
A $10,000 balance at 22% APR with $300/month payments: you pay $5,596 in interest (56% of the original balance). It takes 4.3 years to become debt-free.
What you could earn if this money were invested
Real cost of your debt
Total interest paid
$5,596
Total amount paid
$15,596
Time to payoff
4.3 years
Opportunity cost
$18,269
If invested instead
How to use this calculator
Debt balance — Your current outstanding balance. Include all balances at the same interest rate. For multiple debts with different rates, calculate each separately.
Annual interest rate — Your APR (Annual Percentage Rate). Credit cards average ~22% in 2026. Personal loans: 8–15%. Student loans: 4–7%.
Monthly payment — The amount you pay each month. Paying more than the minimum dramatically reduces total interest and payoff time.
Alternative investment return — What you could earn if this money were invested instead. This is the opportunity cost of carrying debt. S&P 500: ~7% real return.
Real-world examples
Credit card: $10K at 22% APR
With $300/month payments, it takes 4.5 years and costs $5,800+ in interest — 58% extra on top of the original $10K. If that $300/month were invested at 7% instead, you'd have $20,000+ after 4.5 years.
Minimum payment trap: $5K at 22%
Making only minimum payments (~$125/month), a $5,000 balance takes over 20 years to pay off and costs $8,000+ in interest — you pay more in interest than you originally borrowed.
Low-interest debt: $20K at 4%
Student loans at 4% with $400/month payments: paid off in 4.6 years with ~$1,900 interest. The opportunity cost of paying this off early (vs investing) is small — at 7% returns, investing the extra might earn more than the 4% interest costs.
Formula & Methodology
Monthly interest on debt
- Balance = Current outstanding debt
- APR = Annual percentage rate (decimal)
Opportunity cost
- PMT = Monthly payment amount
- r = Investment return rate (decimal)
- n = Number of months to payoff
Assumptions & limitations
- Interest compounds monthly. Some debts compound daily, which increases costs slightly.
- No additional charges are added to the balance during payoff.
- Investment returns are assumed constant. Real markets fluctuate significantly.
- Tax implications of interest deductions are not included.
Frequently asked questions
Why is the real cost so much higher than the balance?
Compound interest works against you with debt. A $10K balance at 22% APR with $300/month payments costs $5,000+ in interest — you're paying 50%+ more than you borrowed.
Should I pay off debt or invest?
Generally: pay off high-interest debt (>7% APR) first, as guaranteed savings beat uncertain market returns. For low-interest debt (<4%), investing the difference may be better.
What is the avalanche method?
Pay minimums on all debts, then put extra money toward the highest-interest debt first. This minimizes total interest paid. The alternative (snowball method) targets the smallest balance first for psychological wins.
How much extra should I pay above the minimum?
As much as you can afford. Every extra dollar goes directly to principal, reducing future interest. Even $50 extra/month on a $5K balance at 22% can save over a year of payments and hundreds in interest.