A post on the blog Financial Highway has provoked discussion on some familiar topics these days: whether it is better to invest funds instead of using them to pay off debt. While the consensus amongst commenters is to pay down debt rather than invest, an important metric to determine which one of the two routes to take goes undiscussed: variable interest rates on debt.

In any analysis of whether or not to pay off debt versus invest, it is critical to take into consideration the risk of not being able to pay off debt moving forward. Many are not aware that the risk increases from uncertain interest rates, so those with ARMs or credit card debt need to take extra care. Furthermore, the risk increases when cash flow evaporates, so doing a dead honest estimate of one’s job security is key. Modifying these factors is any cushion of savings (read: emergency fund), or more generally, any personal assets that can be liquidated with short or medium-term notice for emergency debt paydown. Admittedly, it is difficult to accurately determine whether to invest or pay down debt, so paying down debt is the safer bet.

Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs.  DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.