Pay off the debt or invest? How to compare fairly
Compare the cost of a debt with the net return of an investment, understand the effect of income tax and IOF and learn when paying down debt pays off.
You have some money left over and a debt still open: pay it off or invest? The answer comes from comparing two rates of the same kind, what the debt costs per year and what the investment earns per year after taxes, and from weighing liquidity and risk. The rules cited here are the Brazilian ones.
The central idea
Every real used to pay down a debt "earns" that debt's effective rate, because it is interest you no longer pay. That return is tax-free, since interest you do not pay is not income, and, on a fixed-rate debt, it is certain. An investment, on the other hand, earns a rate that can vary, is subject to income tax and, depending on the product, to risk and a redemption period.
That is why the fair comparison is between the effective rate of the debt and the net rate of the investment, both per year. If the debt has a monthly rate, convert it first: see the guide on nominal and effective rates.
An example with numbers
The numbers below are hypothetical and are meant to show the method, not to predict results. A debt with interest of 1.5% a month equals 19.56% a year effective. A CDB (bank certificate of deposit) that earns 12% a year gross, held for 365 days with R$ 10,000.00 invested, earns R$ 1,200.00 before tax. In that holding range, income tax is 17.5% of the earnings, or R$ 210.00, and R$ 990.00 is left.
| Debt | Investment | |
|---|---|---|
| Rate | 1.5% a month | 12% a year gross |
| Tax on the earnings | none | 17.5% (R$ 210.00) |
| Result per year | 19.56% in favor of paying down | 9.90% net |
With these numbers, paying down the debt wins by a wide margin: it would earn 19.56% a year against the investment's 9.90%.
Tax changes the result
What matters in the investment is the net return. Under the rule in force when this guide was updated, in October 2026:
- Income tax on fixed income taxed by the regressive table, charged only on the earnings: 22.5% up to 180 days, 20% from 181 to 360 days, 17.5% from 361 to 720 days and 15% beyond 720 days.
- IOF on redemptions within 30 days: a share of the earnings that starts high on the first day and reaches zero on the thirtieth.
- Exemption for individuals on some products, such as the LCI, the LCA and the savings account (poupança).
- FGC guarantee: covered deposits and securities are protected up to R$ 250,000.00 per person and per institution, with an overall limit of R$ 1,000,000.00. See the terms on the FGC (opens in a new tab) website.
Tax rules change. Before deciding, confirm the current ones with the Federal Revenue Service or with the institution offering the product.
When paying down debt usually pays off, and when it does not
- Expensive debts, such as revolving credit card balances, overdraft and personal loans with high interest: paying them down usually wins by a wide margin, because no safe investment earns a comparable rate.
- Cheap debts, with a low rate and a long term: an investment with a net return higher than the debt's rate can earn more. But that return depends on the product, the term and the risk, while the debt's cost is certain.
- Emergency reserve. Before using all your money to pay off a debt, keep a reserve for the unexpected. Whoever empties the reserve and later needs emergency credit may end up paying more.
- Liquidity. Money invested with a lock-up period is not available when you need it. Money used to pay off the debt does not come back either.
To pay a debt before the term, the law guarantees early settlement, total or partial, with a proportional reduction of interest and other additions (Consumer Protection Code, art. 52, §2). Ask the institution for the outstanding balance on the date you plan to pay and check that future interest was taken out. To see how the balance falls with each installment, see the guide PRICE or SAC.
How Finasst compares
On the investments screen, enter how much you have available and for how long, add the offers (rate, index, term and tax treatment) and see each one's net return. The indexes used in the projections are explained in the guide on Selic, CDI and IPCA.
If you saved one of your contracts in "My debts", the "Pay the debt down, or invest?" panel compares that debt's total cost with the net return of the best offer.
This guide is educational and informational. It is not financial, legal or investment advice and it does not know your situation. Example figures are illustrative, and rules change: check the current ones before deciding. Legal Notice