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Should I use investments to pay down debt?

Should I use investments to pay down debt?

Jessica

By Jessica on December 20, 2013

Q: I have an investment of $200k, a monthly income of $4,560, and debt of $28,000 (excluding real estate). What would you suggest to either pay off the debt or reduce it?



A: If you were going to pay off, or down, your debt with your investment of $200K, you would have to see if the investment is making more than the cost of the debt. If you have an investment that makes 5% a year and the debt costs you 4%, I would slowly pay down the debt with your normal monthly income and not touch the investment. This way you don't lose the maximum you can make off the 5%.

I would also recommend moving the debt to the lowest percentage rate you can get. Personally, I would pay down the debt as fast as possible, as this would free up your money and liabilities. But you might want to keep the debt for other reasons like credit worthiness. That’s a personal decision.

- Answer from Dave CPA, a verified Accountant on JustAnswer

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