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Loan-to-Invest Calculator
Borrow a lump sum, invest it all at once, repay in instalments — does it beat plain dollar-cost averaging? See for yourself.
Loan terms
Loan annual rate
%
Loan term
5 yrsMonthly payment580
Investment assumptions
Strategy preset
※ Returns are estimated 10-year annualised figures (2016–2026) based on publicly available market data, not exact historical performance. For illustrative purposes only — not investment advice. Past performance does not guarantee future results.
Expected annual return
%
DCA contribution frequency
Results
Above a 6.2% return, borrowing to lump-sum invest wins. At your current assumptions it ends with about 784 more than dollar-cost averaging.
Asset difference
+784
IRR gap 0.8%
Total interest
4,799
60 payments
Total paid in34,799
Borrow & lump-sum
Dollar-cost average
Final assets
42,077
41,292
Total gain
7,278
6,493
Annualized return (IRR)IRR is a money-weighted return — the annualized return on the cash you actually put in (the monthly payments), not the asset's own growth rate. Borrow-&-lump-sum can exceed your expected return because borrowed capital amplifies the position — but only when the return beats the loan rate; below it, leverage works against you and IRR drops instead.
7.8%
7.0%
Borrow & lump-sum (net worth)Dollar-cost average
Risk simulation
What if returns aren't smooth?
The result above assumes a steady return. Leverage is path-dependent, so here we run both strategies through 2,000-plus randomised market paths — same path for both, so it's a fair fight — and report the spread of outcomes.
Expected annual return 7%Paths 2,000
Annual volatility
15%How wildly yearly returns swing around your expected return. A global stock index sits around 15%; single stocks or leveraged products are higher.
Worst-year floor
37%Caps the worst single-year loss any random path can draw, so one fat-tailed sample can't wipe out the whole position. ~37% roughly matches a 2008-style crash.
54.8%
Borrowing wins
of paths end ahead of DCA
5.4%
Goes underwater
of paths dip to negative net worth mid-term
Borrow & lump-sum
Dollar-cost average
Difference
Lucky (90th pct)
65K
54K
+11K
Typical (median)
43K
41K
+1K
Unlucky (10th pct)
27K
32K
−5K
Max drawdown
Borrow & lump-sum
Dollar-cost average
Typical (median)
−10.9%
−8.1%
Unlucky (10th pct)
−27.2%
−20.3%
Deepest peak-to-trough fall in each strategy’s value along the way. The borrowed lump sum is fully invested from day one, so an early slump cuts deeper; DCA builds up gradually, cushioning the same drop.
A simplified lognormal model — not a forecast. Real markets have fatter tails, autocorrelation, and you can be forced to sell at the worst moment. Treat these as rough odds, not promises.
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Further Reading
Borrowing to Invest: Reckless Gamble or Rational Choice?
"Borrow cheap money, earn expensive returns" sounds like free money — but leverage magnifies both gains and losses. Use the calculator to compare a loan-funded lump sum vs. dollar-cost averaging, then look at the break-even return rate that decides who wins.
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This is a free side project I built in my spare time. If it saved you time or helped you think through a decision, buying me a coffee keeps the lights on!
Frequently Asked Questions
- What exactly is this comparing?
- Two ways to deploy the same money. 'Borrow & lump-sum' means borrowing a sum, investing all of it immediately into an index, then repaying principal and interest monthly. 'Dollar-cost averaging' means not borrowing, and instead investing that same monthly amount into the same index over time. Both strategies have identical monthly cash outflows, so it's a fair comparison. Borrowing front-loads the capital (more time in the market, more compounding) at the cost of interest; DCA pays no interest but deploys capital more slowly.
- What does 'break-even return rate' mean?
- It's the investment return at which both strategies finish with exactly the same assets. Above that threshold, borrowing to lump-sum invest wins; below it, dollar-cost averaging is better. The threshold rises with the loan rate — the more expensive the borrowing, the higher the return you need for it to pay off.
- How is the annualized return (IRR) computed?
- For each strategy we solve the internal rate of return on your monthly cash outflows (the fixed monthly payment) and the assets you end with, then annualize it. Because both strategies have the same monthly outflow, whichever ends with more assets has the higher IRR. The cards show both IRRs and the gap between them.
- Why does the green line start near zero?
- The green line is the net worth of the 'borrow & lump-sum' strategy — portfolio value minus the outstanding loan balance. At the start you borrow and immediately invest, so assets and debt offset and net worth is near zero. Over time the investment compounds and the loan amortizes, so net worth pulls ahead. At the end the loan is zero and net worth equals the portfolio value.
- What return and loan rate should I use?
- A globally diversified index fund has returned roughly 5–8% annually over long periods; past performance doesn't guarantee future results. Loan rates depend on the product: mortgages around 2–3%, personal loans 3–8%, margin or pledged-asset loans vary. This tool uses nominal returns (not inflation-adjusted) and does not net out ETF expense ratios, so shave a little off the rate if you want to account for fund fees.
- Is borrowing to invest actually viable? What are the risks?
- In theory, as long as long-term returns stay above the borrowing cost, there's a positive spread — but reality has three big risks. Sequence-of-returns risk: if a crash hits right after you invest, you still owe the payments and may be forced to sell low. Cash-flow risk: the monthly payment is a hard obligation that hurts if your income stops. Behavioral risk: paper losses combined with debt make irrational decisions likely. The headline result uses a fixed return, so treat it as a best-case mathematical ceiling — then open the risk simulation below it to see how volatility widens the spread of outcomes and how often borrowing actually wins. Keep an emergency fund and size your bets responsibly.
Built by indigo.la.ringo · AppicLab ·
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The Loan-to-Invest Calculator answers a common but hard-to-compute question: instead of slowly dollar-cost averaging, is it worth borrowing a lump sum, investing it all at once into an index, and repaying the loan in instalments? Enter the loan amount, annual rate, and term — the tool computes your monthly payment, then uses 'put that same monthly payment into dollar-cost averaging' as the comparison group. At your assumed return rate, it projects both strategies' net worth year by year and shows each one's terminal assets, the gap in annualized return (IRR), the total interest cost, and the all-important break-even return rate: the return above which borrowing-to-invest beats dollar-cost averaging. It uses a single fixed return for a deterministic projection (no historical backtest or volatility simulation), runs entirely in your browser, and sends no data to a server. Leverage amplifies both gains and losses — size your bets accordingly.
About the Author
indigo.la.ringo
A software engineer chasing the slash-career dream. Was trying to figure out my relationship with the world — now being forced to figure out my relationship with AI. Lately, obsessed with figuring out the relationship between people and money. Either way, whatever answer I land on, it's fine.