Invest or Repay

[raskolnikov]

I just won $5000. I am trying to decide whether to invest it or use it to pay off a debt. What would you do?

 

[Frodo]

unless the interest on the debt is tax deductible, pay off the debt.

 

[Former]

Which is higher? The cost of the debt (including possible deductions mentioned by Frodo, plus intangible things like effect on your credit rating) or the return on the investment?

If the cost of the debt is higher pay it off. If the return is higher, invest and use the excess return to pay off the principle of the debt. Simple.