How to use Finance vs Cash
Pay cash, or borrow and keep your cash earning? This guide shows how to set up a purchase and its loan offers, then how the tool decides. Every demo on this page is the real tool, running live in your browser. Press Pause on one to try it yourself.
The short version
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Load or enter a purchase
Start from a worked comparison in Quick Start, or enter the cash price, the cash you have, and the Risk-Free Rate your spare cash earns.
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Describe each loan offer
One tab per offer on Loan offers: its loan type, term, rate, down payment and fees. A gauge beside a field sweeps it with Optimise.
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Simulate and read
Press βΆ Simulate. The verdict names the best strategy and its Net Benefit vs Cash; the chart and the tables below give the detail.
Nothing is uploaded. Every figure is worked out in your browser, and your plan is kept in this browser only. This guide is general information, not financial advice.
The screen
Inputs on the left, the answer beside them, then the chart and the tables under it. Point at a part in the list to see where it is.
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Inputs
Quick Start, save and open, then three tabs: Purchase, Loan offers and Assumptions. βΆ Simulate sits at the bottom. The chevrons fold the card to a slim Inputs rail.
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The answer
The verdict in a sentence, Show in today's money, then four figures: Best Strategy, Net Benefit vs Cash, Total Interest (Best) and Cash Purchase Wealth.
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Chart
Each offer and the cash purchase over time, read as Ending Wealth, Net Benefit, Investment Value or Loan Balance. Share sits above it.
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Tables
Scenario Comparison, every figure side by side; the Amortization Schedule, one row per repayment; and What this assumes.
Top right, Tour replays a one minute walk through the tool, and Guide opens this page.
Quick Start
Six worked comparisons, each a decision people really face: a House, fixed vs float, a Car, 3yr or balloon, a Phone on a plan that quotes no rate, a Credit card 0% conversion, a Motorbike, flat rate, and Furniture, pay later. One click fills every tab and runs it.
On a phone, press Full screen under a demo and turn the phone sideways to read it.
Open the inputs
On a first visit the card is folded to a rail, so the answer has the room. Click Inputs to open it; it stays the way you leave it.
Pick a comparison
Hover a button to read what it holds and what it teaches. A click loads it and runs it.
Read the answer
The verdict and Net Benefit vs Cash: for the car, every loan trails paying cash, the three-year one by the least.
- A Quick Start is also the reset. Each one is built from the same defaults, not from what is on screen, so it clears the plan before it.
- Each one carries a lesson. The car's smallest instalment (the balloon) finishes last; the motorbike's 0.9% a month flat costs 21.03% a year; the furniture's payment holiday grows the debt.
The purchase
The Purchase tab holds what both paths share: the price, the cash you have today, and the symbol money is shown in. Typing never reruns the answer; βΆ Simulate does.
The price and your cash
Cash Purchase Cost is what paying in full costs. Available Cash is what you hold today; it must cover the price.
A price per offer
Price Each Loan Offer Separately gives each offer its own price, as an amount, a % of cash or a % off.
Simulate
An edit sends the board out of date and says so above the button. βΆ Simulate runs every offer against cash.
- Cash below the price is not modelled. The tool compares financing against genuinely paying cash, so the board stays blank and says why.
- The currency is a label. Nothing is converted.
Loan offers
Each offer is a tab on the bar. The form under it is that offer, in titled sections: Loan Structure, Repayment Term, Interest Rate (or Repayment Plan for a known repayment), then Upfront & Fees. Every edit applies as you make it.
One tab per offer
Click a tab to edit it, double-click to rename it, click its dot to recolour it. The icons beside the bar duplicate or remove the one on screen.
Add an offer
+ adds one: an amortizing loan at 5% over 60 months, 0% down.
Its loan type
Loan Type picks one of seven structures. The fields below change to suit it.
Term, rate and fees
Term counts repayments, Finance Rate is yearly, then the Down Payment, Origination Fee, Fee Treatment and Admin Fee.
Simulate
The new offer joins the comparison. A 4.9% flat rate shows as 9.32% in Effective Rate (APR).
- Learn more β under Loan Type opens Loan Types Explained: each structure with its formula, the markets it is sold in and a worked example.
- Repayment Frequency converts the term when it changes: 60 months becomes 260 weeks, the same five years.
Loan types with a field of their own
Some structures bring a field: Interest-Only or Payment Holiday periods, a Residual, a Repayment Amount instead of a rate. And any rate that can move takes a Rate Basis of Schedule.
Known repayment
For a plan that quotes an instalment and no rate: enter the Repayment Amount, one figure or a stepped Schedule.
The rate it implies
Implied Rate is the yearly rate that repays the loan exactly. 24 payments of $82 on $1,800 is 9.08%; of $78, 3.86%.
Fixed, then floating
A Rate Schedule is consecutive periods, each Fixed or Floating between a min and a max. Here: two years at 5.80%, then 5% to 8.5%.
The band
A floating rate runs three times, at its min, middle and max. The chart shades the range; the tables use the middle.
- A flat rate and a known repayment take no schedule. A flat loan fixes its interest at the start; a known repayment has the rate as its answer.
- No rate repays it? A repayment too small for any rate is skipped, and the banner says to raise it or shorten the term.
Assumptions
What your spare cash earns, how a quoted loan rate is read, and how fast prices rise. The first is the yardstick every offer is measured against.
Risk-Free Rate
What cash earns in a safe place, such as a savings account. Every offer and the cash purchase use it.
Rate Convention
Effective annual (EAR) compounds a loan rate down to each repayment; Nominal annual (APR) divides it. Loans only, never the cash rate.
Inflation
Never changes a loan or the cash. The note under it says what the price costs at the end.
Show in today's money
Beside the results: every figure divided by inflation up to its own date. Off again, every figure is back to the cent.
The answer
The verdict names the best strategy and by how much it beats, or trails, paying cash. The four figures under it say the same in numbers, and the Scenario Comparison shows how each offer got there.
The verdict
The best strategy, its Net Benefit vs Cash and when, and its effective rate against the Risk-Free Rate. Here the 5% loan beats cash by $1.5k.
Four figures
Net Benefit vs Cash: above zero, financing wins. Cash Purchase Wealth: the cash left after paying in full, grown at the risk-free rate.
Optimization Target
Which offer counts as best: Highest Net Benefit, Lowest Total Interest or Lowest Financing Cost. The 7% loan pays $1,059 less interest, yet trails cash by $842.
Scenario Comparison
Every figure per offer, each at the end of its own term, against cash over the same time.
- Banners say what to doubt. Negative carry: a loan's effective rate is above the risk-free rate. Negative amortization: a repayment is below the interest due, so the balance grows.
- What this assumes, the last card, lists what the answer rests on for this plan: the cash, the rates, the fees, the horizon.
Chart and schedule
The chart puts every offer and the cash purchase on one time axis, in the finest repayment period on show. The Amortization Schedule under the table gives one row per repayment.
Chart Metric
Ending Wealth (cash kept less debt), Net Benefit, Investment Value or Loan Balance.
Read a date
Hover the chart and the line under it reads every series at that date.
Amortization Schedule
Opens from its chevron. One tab per offer: start balance, interest, principal, payment, end balance. β¬ CSV saves it.
- Scroll or pinch to zoom, drag to pan, β³ to reset. Past an offer's term its cash keeps compounding at the risk-free rate, so shorter offers line up with longer ones.
Optimise
The gold gauge beside a field sweeps it over a range on the offer on screen, up to two settings at once. The board then shows the best tested setting, your current one and the worst, each beside the cash purchase.
Pick a setting
Click the gauge beside Term, Finance Rate, Down Payment, a fee, the Risk-Free Rate and more.
Set the range
Start value, End value and Steps, the values tested. β Done keeps it.
βΆ Optimise
Simulate becomes βΆ Optimise, and the note above it says what will run.
Best, yours, worst
Three tiles and the cash purchase. The chart plots the Objective against the setting; two settings draw a surface.
Back to comparing
Cancel drops the sweep, and βΆ Simulate compares every offer again.
- One offer, every combination. Up to 50 values a setting and 2,500 runs, all on the same engine as Simulate. The Objective can be Net Benefit, Ending Wealth, Total Interest, Total Financing Cost or Effective Rate.
- Left out on purpose: the loan type, the frequency and the rate and repayment bases, since each swaps the fields around it.
- The best is the best on these inputs, not a forecast. It moves when the cash, the rates or the price do.
How the numbers work
What each field means, where it enters the calculation, and what moving it does to the answer. Every formula here is the one the tool runs.
The model in one picture
Both paths start from the same cash. Paying cash spends the price today and leaves the rest earning the risk-free rate. Financing spends only the down payment and any upfront fee today, keeps the rest earning the same rate, and pays each repayment out of it. The tool compares what each path holds at the end of the offer's term, once the loan is repaid.
- AAvailable Cash
- CCash Purchase Cost
- Dthe down payment, a share of the offer's price
- F0an origination fee Paid upfront from cash (else 0)
- Rkrepayment k of n, set by the loan type
- athe Admin Fee on every repayment
- ithe Risk-Free Rate per period: (1 + rf)1/m β 1, with m repayments a year
- nthe number of repayments, the Term
- Read the bracket as a present value. It is what financing lets you keep today, less what everything you pay later is worth today at the rate your cash earns. The tool carries that forward to the end of the term, so Net Benefit is in the money of that date.
- The wash. Borrow at exactly the rate your cash earns, with no fee, and the repayments are worth exactly the loan: Net Benefit is zero for every loan type, frequency, term and down payment. Measured on the car's three-year loan at 4.5% with its fee removed: $0.00.
- So the rule is one comparison. With no fees and the offer at the cash price, financing wins exactly when the loan's Effective Rate (APR) is below the Risk-Free Rate. Fees count against it, and a cheaper offer price counts for it.
- Timing. The cash grows for a period first, then the repayment comes out of it. The first repayment falls one period after the purchase, and the last one clears the loan exactly.
- Each offer is scored at the end of its own term, against paying cash over the same time. Best Strategy is the top offer by the Optimization Target, or Cash Purchase when every Net Benefit is below zero.
| Figure | What it is | In the maths |
|---|---|---|
| Ending Wealth | The cash still invested at the end of the term, less any debt. | Wn. On the chart over time: invested cash β loan balance. |
| Cash Purchase at Same Horizon | The cash left after paying in full, grown to the offer's own end date. | Wcash. The Cash Purchase Wealth tile runs it to the longest offer. |
| Net Benefit vs Cash | How much better off financing leaves you. Below zero, paying cash is better. | Wn β Wcash. A difference under half a cent reads as a tie. |
| Effective Rate (APR) | What the loan really costs a year, whatever its shape. | The rate r that makes the repayments repay the amount financed, as (1 + r)m β 1. An effective annual rate, and it leaves fees out. |
| Total Interest Paid | All the interest over the term. | Ξ£ interestk. No fees in it. |
| Total Financing Cost | What borrowing costs, before any credit for the cash it keeps. | Total interest + origination fee + a Γ n. |
| Total Out-of-Pocket | Every dollar handed over. | D + F0 + Ξ£ Rk + a Γ n. A fee inside the loan is in the repayments, counted once. |
Watch out. Total Financing Cost and Total Out-of-Pocket ignore what your cash earns meanwhile, so they always favour paying cash. A 0% plan with no fee costs $0 and is still better than cash, because the cash you keep earns interest. Net Benefit is the only figure that counts both sides.
Purchase
The price and the cash. Surprisingly, the cash you hold does not move the answer at all, as long as it covers the price.
- Pβ²the offer's price: C unless Price Each Loan Offer Separately is on
- C β Pβ²a discount the financing side keeps invested and the cash buyer never gets
| Field | What it is | In the maths | Raise it |
|---|---|---|---|
| Currency Symbol | The symbol money is shown in. | Nowhere. Nothing is converted. | no effect |
| Cash Purchase Cost | What paying in full costs today. | C. Paying cash spends it; financing borrows it less the down payment, so it scales the loan. | β² amount borrowedβΌ Net Benefit While the loan costs more than cash earns. Car, three-year loan: +10% is β$260. |
| Price Each Loan Offer Separately | Gives each offer its own Offer Price. | Off, Pβ² = C for every offer. On, each offer states Pβ² as an amount, a % of cash or a % off. Cash is always scored at C. | a choice |
| Available Cash | Cash on hand today. | A. Must be at least C. The surplus earns the same in both paths and cancels out of Net Benefit. | β² both wealth linesno effect on Net Benefit Car: Β±10% is $0. |
Watch out. More cash in the bank does not make borrowing smarter. It raises Ending Wealth and Cash Purchase Wealth by the same amount, and Net Benefit not at all. What decides it is the loan against the risk-free rate.
Loan offers: the loan structure
The loan type sets the repayments Rk. Every type builds the same rows (start balance, interest, principal, payment, end balance), and the last repayment always clears what is left. Loan Types Explained walks through each one with charts.
- Bkthe balance after repayment k; B0 = L, the amount financed
- rthe loan rate per period (see term and rate)
- n, kthe term, and the repayment being made
| Loan Type | What you pay | In the maths | Next to amortizing |
|---|---|---|---|
| Amortizing | One equal instalment; interest on what you still owe. | R = L Γ r(1 + r)n(1 + r)n β 1 At 0%, R = L Γ· n. Re-worked over the remaining term whenever the rate changes. | the standard |
| Flat rate | Interest on the original amount for the whole term. | R = L Γ· n + L Γ r Total interest = L Γ r Γ n. The first period's rate holds for the whole loan. | β² effective rate, about double Motorbike: 10.8% flat is 21.03% effective; amortizing, 11.35%. |
| Interest-only | Interest alone for the Interest-Only periods, then instalments. | Rk = B Γ r for k β€ q, then amortizing over the rest. q = n repays all the principal at the end. | β² balance carried longer Magnifies the spread, whichever way it runs. |
| Balloon / residual | Smaller instalments, with the Residual due in a lump at the end. | R = (L β ΟL(1 + r)n) Γ r(1 + r)n(1 + r)n β 1 Final payment = R + ΟL, with Ο the residual share. | βΌ instalment, β² interest Car: $630.55 a month, then $14,805.55; 5 years, β$6,444 against β$5,162. |
| Known repayment | The instalment you were quoted, one figure or a stepped schedule. | Solves r so that Bn = 0, by bisection. Implied Rate = (1 + r)m β 1. A repayment below the interest due grows the debt, and the tool says so. | rate is the answer Phone: 12 Γ $150 on $1,800 is 0%; 36 Γ $57 is 9.07%. |
| Bullet | Nothing until maturity, then all of it. | Interest is added to the debt every period; one payment of L(1 + r)n at the end. | β² balance carried longest |
| Deferred start | A Payment Holiday, then normal instalments. | Bh = L(1 + r)h after h holiday periods, then amortizing over n β h. Interest is added to the debt meanwhile, so the balance rises above the amount borrowed. | β² debt during the holiday Furniture: $6,000 grows to $7,194 before the first payment. |
| Field | What it is | In the maths | Raise it |
|---|---|---|---|
| Loan Type | The repayment structure the lender sells. | Picks the formula for Rk above. | a choice of structure |
| Interest-Only / Payment Holiday | How many repayments run before normal instalments begin. | q or h. Capped at the term. | β² balance carried longerβΌ Net Benefit While the loan costs more than cash earns. |
| Residual | The share of the amount financed still owed at the end. | Ο, 0% to 99% of L. | βΌ instalmentβΌ Net Benefit While the loan costs more than cash earns. |
Watch out. A flat rate is not comparable with an ordinary rate. You keep paying interest on money you have already repaid, so the average balance is about half the loan while the interest is charged on all of it. Compare Effective Rate (APR), never the quoted figure: the motorbike's 0.9% a month flat costs nearly twice its 10.8% amortizing twin.
Not modelled: deferred interest. Some 0% promotions charge all the back interest if the balance is not cleared by a date. The tool has no such switch. Its 0% plans are amortizing loans at 0%, with any conversion fee as an origination fee.
Loan offers: term and rate
How often you repay, for how long, and at what rate. A yearly rate becomes a rate per repayment one of two ways, set on the Assumptions tab.
- Ryrthe Finance Rate (or a schedule band), a year
- mrepayments a year: 52, 26, 12 or 1
- rthe rate charged each repayment period
| Field | What it is | In the maths | Raise it |
|---|---|---|---|
| Repayment Frequency | Weekly, fortnightly, monthly or yearly. | m, in the loan's r and the cash's i. Switching converts the term, so the years stay the same. | β² repaid sooner Car: weekly is +$57; yearly, β$836, since each payment waits a year. |
| Term | The number of repayments. | n. How long the loan runs, and how long the spread between loan and cash runs. | βΌ instalmentβΌ Net Benefit While the loan costs more than cash earns. Car: 48 months is β$1,012; 24 months, +$936. |
| Rate Basis | Simple, one rate; or Schedule, periods that each hold a rate. | Picks Finance Rate or Rate Schedule. Not for a flat rate or a known repayment. | a choice |
| Finance Rate | The yearly rate the lender quotes. Flat Rate on a flat loan, Interest Rate on a bullet. | Ryr, made r by the convention. | β² repaymentsβΌ Net Benefit Car: +1 point is β$667. |
| Rate Schedule | Consecutive periods from the first repayment, each Fixed or Floating between a min and a max. The last stretches to the term. | Each band sets r for its repayments; the instalment is re-worked on the balance at each change. A floating band runs at its min, middle and max. A payment holiday's schedule starts after the holiday. | β² a band, βΌ Net Benefit House, 2 years fixed then 5% to 8.5%: Ending Wealth from β$321k to +$18k, in today's money. |
| Repayment Basis | Known repayment only: Single amount or a stepped Schedule. | Picks the stream R1 β¦ Rn the rate is solved from. | a choice |
| Repayment Amount / Schedule | What you hand over each period. | Rk, given; r is solved from it. | β² Implied RateβΌ Net Benefit |
| Implied Rate | The rate the plan works out to. Read only. | (1 + r)m β 1, an effective annual rate. | an answer, not an input |
Watch out. A longer term is only worse while the loan costs more than your cash earns. Below the risk-free rate it is better, because cheap debt is kept longer. At exactly the risk-free rate, the term stops mattering.
Loan offers: upfront and fees
What leaves your cash on day one, and what each fee costs once the cash it takes would have earned interest.
- dthe Down Payment share
- F, fthe Origination Fee, as money or as a % of L
- athe Admin Fee a repayment
| Field | What it is | In the maths | Raise it |
|---|---|---|---|
| Offer Price | With a price per offer on: what this offer charges. | Pβ²: an amount, C Γ % of cash, or C Γ (1 β % off). | βΌ Net Benefit Furniture: 10% off cuts the loss from β$2,172 (the holiday) to β$682. |
| Down Payment | The share of the price paid on day one. 100% is paying cash. | D, out of W0; the loan shrinks by the same. At 100% there is no loan and Net Benefit is 0. | βΌ amount borrowedβ² Net Benefit While the loan costs more than cash earns. Car: 20% is +$289. |
| Origination Fee | A one-off lender's fee, as money or a %. | F or f. Never counted as interest. | βΌ Net Benefit Car: $400 costs $456 by year three, 400 Γ 1.045Β³. |
| Fee Treatment | Paid upfront from cash, Added to the loan or Deducted from the advance. | Upfront: F0 = F. Inside the loan, the fee is repaid with interest at the loan rate, never counted twice. Deducted, a % fee is grossed up so the net advance still meets the price. | a choice Car: inside the loan costs $26 more, the fee borrowed at 8.4% instead of paid from cash earning 4.5%. |
| Admin Fee | A fixed fee on every repayment, such as account-keeping. | a, out of the cash with each Rk. Total = a Γ n. | βΌ Net Benefit Car: $10 a month is β$384. |
Watch out. Effective Rate (APR) is the contract rate of the repayments and leaves fees out, in every treatment. A 0% plan with a 3% fee still reads 0.00%. The fee is priced in Total Financing Cost and in Net Benefit: the card's six-month plan finishes last on it.
Assumptions
The risk-free rate is the opportunity cost of your cash: what it would have earned if you had not spent it. It grows the kept cash and, through the identity above, discounts every repayment.
- rfthe Risk-Free Rate, a year
- ΟInflation, a year
| Field | What it is | In the maths | Raise it |
|---|---|---|---|
| Risk-Free Rate | What spare cash earns in a safe place. | i, in both paths. Untaxed, compounded once each repayment period. | β² Net Benefit Whenever you borrow. Car: +1 point is +$626. |
| Rate Convention | Effective annual (EAR) or Nominal annual (APR). | How a loan's yearly rate becomes r. Never the cash rate, which is always effective. | nominal: β² cost, βΌ Net Benefit Car: nominal is β$221; 8.4% charged 0.70% a month, not 0.67%. |
| Inflation | How fast prices rise. | Ο, only when reading in today's money. Never touches a loan or the cash. | no effect on the run |
| Show in today's money | The switch beside the results. | Divides each figure by (1 + Ο)t at its own date; a total is the sum of its parts each read that way. The purchase-day figures stay as they are. | a reading, not a model |
Watch out. The risk-free rate is not what an investment portfolio might return. If you would put the kept cash in shares, a higher rate would flatter financing, but with a risk the tool does not show. Use what the cash would really earn, safely, after tax.
Worked example
The Car, 3yr or balloon Quick Start's first offer, by hand. Every figure below is the one the tool prints.
Car: $45,000, three-year loan, 10% down
$60,000 on hand, 8.40% a year, 36 monthly repayments, a $400 fee paid upfront, 4.50% risk-free, Effective annual.
- Down payment10% Γ $45,000$4,500
- Amount financed$45,000 β $4,500$40,500
- Loan rate a month1.0841/12 β 10.6744%
- Instalment$40,500 Γ 0.006744 Γ 1.006744Β³βΆ Γ· (1.006744Β³βΆ β 1)$1,270.86
- Total interest36 Γ $1,270.86 β $40,500$5,250.97
- Cash kept today$60,000 β $4,500 down β $400 fee$55,100
- Cash rate a month1.0451/12 β 10.3675%
- Kept cash, grown$55,100 Γ 1.045Β³$62,878.25
- Repayments, grown$1,270.86 Γ (1.045Β³ β 1) Γ· 0.003675β$48,819.52
- Ending Wealth$62,878.25 β $48,819.52, the loan now repaid$14,058.74
- Cash at the same horizon($60,000 β $45,000) Γ 1.045Β³$17,117.49
- Net Benefit vs Cash$14,058.74 β $17,117.49β$3,058.76
- The same answer as a present value. At 0.3675% a month the 36 instalments are worth $42,780.38 today. Financing kept $40,100 ($45,000 β $4,500 β $400). The gap, β$2,680.38, grown 1.045Β³, is β$3,058.76.
- Why it loses. The loan costs 8.40% while the kept cash earns 4.50%. On about $40,000 for three years that spread is the loss, plus the fee.
What moves the answer
The same loan, with one input moved down and then up and the rest left as the Quick Start sets them. Measured on the tool itself.
- Term36 β 24 / 48 months+$936β$1,012
- Finance Rate8.4% β 7.4% / 9.4%+$667β$667
- Risk-Free Rate4.5% β 3.5% / 5.5%β$608+$626
- Origination Fee$400 β $0 / $800+$456β$456
- Down Payment10% β 0% / 20%β$289+$289
- Cash Purchase Cost$45,000 β $40,500 / $49,500+$260β$260
- Available Cash$60,000 β $54,000 / $66,000$0$0
Read it from the top: the longest bar is the input your answer rests on most. Measured by financingvscash/guides/_sensitivity.mjs.
- The spread decides the sign; the term and the amount decide the size. Term tops the chart because it is how long a loan costing 3.9 points more than cash runs. The finance rate and the risk-free rate move the answer almost equally and in opposite directions: only the gap between them counts.
- No single plausible move rescues this loan. Each bar is at most about $1,000 against a $3,059 loss. It draws level with paying cash only at a Finance Rate of about 3.81%, below the 4.5% risk-free rate because the $400 fee must be earned back too.
- The cash in the bank does nothing. Its bar is empty: the surplus earns the same either way.
- For your own decision: argue about the rates first, then the term. If your loan's effective rate is well above what your cash safely earns, a shorter term or a bigger down payment loses less, but paying cash still wins.
The longest bar, live: the same loan over a year more, then a year less, with Net Benefit on the chart.
The base case
Net Benefit β$3.1k after 36 months. The chart shows each loan's lead over cash over time, below zero all the way.
A longer term
48 months: a smaller instalment, but a year more of the spread. Net Benefit β$4.1k.
A shorter term
24 months: a bigger instalment, a year less of the spread. Net Benefit β$2.1k.
What it leaves out
The comparison is clean because it holds a lot still. Know what that is before you act on it.
- The item itself. It costs the same either way, so what it is later worth is left out of both paths. A car that is worth less on a loan (insurance, a lien) is not modelled.
- Tax. The cash earns the risk-free rate untaxed, and loan interest is never deductible. If yours is taxed, enter the after-tax rate.
- Risk and access to cash. The kept cash is assumed safe and earning a fixed rate. Keeping a buffer for an emergency has a value the tool does not count.
- A rate that floats is three paths, not a forecast. The tables read the middle. Your loan could follow any path inside the band, or outside it.
- Penalties and promotions. No late fees, early repayment, break costs, or deferred interest charged back when a 0% promotion ends. Only the fees you enter.
- Different end dates. Each offer is scored in the money of its own end date. Offers of different lengths compare more fairly with Show in today's money on, and that reading uses inflation, not the risk-free rate.
- Cash that runs out. If the repayments drain the kept cash below zero, the shortfall is charged the risk-free rate, as if you could borrow at it. With Negative carry on a long loan, check the Investment Value line stays above zero.
When not to trust it. If the answer is within a few hundred dollars of zero, the choice of risk-free rate decides it, so test a point either side. If you would invest the kept cash in something risky, the tool's answer is the safe case only. And if the loan has terms you could not enter, such as a promotion that ends, read the contract, not the chart.
Ready to compare your own?
Open the tool