From what loan rate does repayment pay off more than investing?

There is no fixed threshold that applies to every household, because the after-tax investment return depends on the investment chosen, the Sparerpauschbetrag, and the investment period. As a rough guide: if the loan rate is significantly above the expected gross return, that points toward repayment first, because the Abgeltungsteuer further reduces the investment return. If it is significantly below, that points toward investing. In the range in between, where both values are close, the answer depends heavily on individual assumptions and should be calculated, not estimated.

Why is the Abgeltungsteuer often overlooked in a simple rate comparison?

Because loan rate and investment return look like comparable percentages at first glance. But the loan rate is already the actual cost burden, while the investment return is a gross figure from which 26.375 percent Abgeltungsteuer and Solidaritätszuschlag still apply to the portion above the Sparerpauschbetrag of 1.000 euros per person per year. Anyone who puts both figures side by side unchanged is in effect comparing a net with a gross value.

Should I build an emergency reserve first before making extra repayments or investing?

That is a sensible sequence for most households, because without a buffer an unexpected expense would otherwise need to be financed via a new, often more expensive loan. How large this reserve should be depends on your own income security and fixed running costs and cannot be given as a blanket figure.

What happens if I have several loans with different interest rates?

In that case it generally pays to direct the extra surplus at the loan with the highest interest rate first, regardless of its remaining balance, because every additional euro repaid there brings the largest guaranteed saving. Only once the most expensive loan is paid off does the question shift to the next-cheapest loan or to investing.

Does the answer change if the loan rate can change during the term?

Yes. A variable interest rate or an expiring fixed-rate period means the loan rate in effect today is not guaranteed for the entire period under consideration. A comparison that uses only the current rate can prove too optimistic or too pessimistic for the repayment side over several years. Anyone expecting a rate change, or aware of the possibility, should factor it into their own calculation rather than assuming a permanently constant rate.

Saving and Paying Off Debt at the Same Time: What Actually Pays Off More

A rate-comparison calculator puts two percentages side by side and names a winner. It knows neither the Abgeltungsteuer (capital gains tax) on the investment side nor the rest of your household over several years. Two households with the same monthly surplus but different loan interest rates show a very different picture.

Anyone who has money left over each month and is also paying off a loan, financed furniture, or an old overdraft sooner or later faces the same question: pay off debt first or invest the money? A rate-comparison calculator online answers this with a single comparison: loan interest rate versus expected investment return. That calculation overlooks two things that are decisive for the actual outcome: the tax on investment income (Abgeltungsteuer), which eats into part of the expected return, and the rest of the household, which keeps running around this decision for years.

The figures below are model calculations with plausible example assumptions about loan size, term, and monthly surplus. The Abgeltungsteuer of 26.375 percent (25 percent flat tax plus Solidaritätszuschlag, without church tax) and the Sparerpauschbetrag (saver's allowance) of 1.000 euros per person per year are real statutory values (as of 2026). Miravel calculates with your own figures.

Why a simple rate comparison is not enough

The common rule of thumb sounds convincing: if the loan rate is above the expected investment return, repayment first is worthwhile; if it is below, investing pays off. But this rule compares two figures that stand on different foundations. The loan rate is a guaranteed value, due every month regardless of what happens in the capital markets. The investment return is first an assumption, not a guarantee, and second a gross figure from which the Abgeltungsteuer still deducts something before it reaches the portfolio. A rate calculator that puts 9 percent loan interest against 6 percent gross return implies a clear lead for repayment. But it does not show how that same comparison shifts with a cheap instalment loan at 3 percent, and it certainly does not show what is left in the portfolio or account after tax.

The timeline adds another dimension. A loan has a fixed term and is eventually paid off; after that the monthly surplus changes sharply because the loan repayment drops away. Anyone who only compares today's interest rate with today's return misses this inflection point and plans past the real turning point.

Two households, the same decision, different loan rates

Ben and Melis both have an instalment loan with a remaining balance of 12.000 euros and an original term of five years, and both have 200 euros per month to spare, which they can either put toward extra repayment or invest in an ETF savings plan. The only difference: Ben pays 9 percent interest on an expensive consumer loan, Melis pays 3 percent on a cheaply financed loan.

Ben: at 9 percent loan interest, the simulation shows a lead for repayment

What the Miravel model calculates for Ben's household: if Ben puts the 200 euros monthly surplus toward extra repayment, the loan is fully paid off in around two and a half years instead of the originally planned five. From that point he invests the freed-up loan repayment together with the still-available surplus in an ETF savings plan, using the same planning assumption of 6 percent gross return per year as elsewhere in this model. At the end of the five-year horizon the result is assets of around 14.570 euros, with only around 1.440 euros in total interest paid.

If Ben instead invests the 200 euros from the start in the same ETF savings plan and only pays the loan on schedule, the simulation shows a portfolio of around 14.020 euros net after deducting Abgeltungsteuer of 26.375 percent on capital income above the Sparerpauschbetrag, while the loan repayment continued. In this model calculation, repayment-first is around 550 euros ahead, because the guaranteed interest saving of 9 percent is higher than what remains of the 6-percent investment return after tax.

Melis: at 3 percent loan interest, the picture reverses

Melis has the same remaining balance, the same monthly surplus, and the same five-year horizon as Ben. The only difference is the loan rate of 3 instead of 9 percent, and that single difference reverses the outcome.

Repayment first: at 3 percent interest the loan is paid off slightly more slowly than Ben's, in around two and a half years, with only around 470 euros in total interest paid. Assets at the end of the horizon after switching to the ETF savings plan: around 13.000 euros.
Investing instead of repaying: with the same 6-percent planning assumption and identical Abgeltungsteuer, the result is the same net portfolio as Ben's, around 14.020 euros, minus the remaining balance already regularly repaid at that point.
In this model calculation, investing is around 1.020 euros ahead for Melis, because the guaranteed interest saving of only 3 percent is lower than the after-tax investment return.

The only difference between Ben and Melis is the loan rate. At 9 percent the simulation shows a lead for repayment; at 3 percent a lead for investing; at a loan rate close to the 6-percent planning assumption itself both paths come out roughly equal in this model calculation. That is not an opinion but the point where the guaranteed interest rate and the after-tax return roughly balance each other out.

What this calculation really shows

A pure rate-comparison calculator knows neither Ben's nor Melis' actual loan rate in advance but asks for it, and it usually does not know the Abgeltungsteuer at all. Anyone who calculates both figures by hand often gets to the right answer for a single point in time, but not for the turning point at which the loan is paid off and the monthly surplus suddenly increases. That is precisely where Ben and Melis also differ in the simulation: whoever pays off the loan sooner has their freed-up repayment starting to compound earlier, which amplifies or attenuates the difference between the two strategies over the years, depending on which side was already ahead.

What can actually be changed here

The answer depends more strongly on your own loan rate here than in most other decisions, but there are additional levers that only become visible when seen together:

Look up the actual effective interest rate of your own loan precisely, do not estimate it, because even two or three percentage points difference can reverse the outcome
Check whether an emergency reserve for unexpected expenses exists before the monthly surplus is committed in either direction
Include the Abgeltungsteuer and Sparerpauschbetrag in your own calculation, rather than comparing loan rate and gross return directly
Plan for the point of full repayment, because the monthly surplus increases significantly from that moment on
With multiple loans at different interest rates, compare the most expensive one against your own investment return first, not the one with the highest remaining balance

Which of these levers tips the balance depends on your own loan rate, the existing buffer, and the rest of the household over the years. This cannot be looked up in a single rate-comparison calculator. It requires a calculation that maps loan repayment, investment return, Abgeltungsteuer, and the rest of the household together over years.

Why the whole picture makes the difference here

Miravel does not compare two isolated percentages. It simulates your entire household over years: loan repayment, ETF savings plan, Abgeltungsteuer on capital income, income, and household buffer, all together at every point on the timeline. Precisely for the question of repaying or investing, that is not a comfort but the only way to see the actual turning point, rather than estimating it with a rule of thumb.

Your data stays in your browser. Miravel does not tell you whether to repay or invest. It shows you what happens with your own loan rate and your own surplus over the next years.

In the end, this isn't just an interest-rate comparison, it's a question of financial wellbeing: which path feels more sound over the years once loan repayment, ETF savings plan, and the rest of your household are viewed together.

Frequently asked questions

Miravel simulates loan repayment, ETF savings plan, and Abgeltungsteuer together with the rest of your household over years, not just two percentages in isolation. Start free now.