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I know technical debt is a metaphor from finance and this question is kind of philosophical.

How would you define the interest rate of technical debt and especially differentiate it from the underlying loan?

Example: Due to a close deadline, the team takes a quick and dirty shortcut and takes technical debt. It gets paid back pretty soon by refactoring to a clean solution. The effort for building the clean solution is the loan while the additional effort for the refactoring as such + the potentially lower productivity of dealing with the code of the dirty solution is the interest, right?

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I'm not sure there really is a 1-1 definition, but how I personally would do so is...

Loan = EffortForProperSolution - EffortForTemporarySolution
(Reasoning: The loan is the actual short-term gain.)

Interest = The potentially lower productivity of dealing with the code of the dirty solution
(Reasoning: The interest is the ongoing cost.)

Service Charge = The effort of transforming the temporary solution into a proper solution.
(Reasoning: If you pay back the technical debt immediately after accruing it, you never have to pay any interest...but you still have to pay this.)

...It's not a perfect analogy, because you never actually have to pay back the principal sum of the loan. But that's the reality. There's probably a better name than 'Service Charge'. Buyout-Amount?

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My more-technical opinion on this matter is that the "loan and interest" analogy – as well as the entire idea of "debt" – fails.

The team decided to do something. Presumably they did so because they felt that a "better" solution was unachievable, but nevertheless, "this is what they did," and this is the only thing that remains in the product.

The analogy of "debt," and in general of "money," omits the fact that we're talking about a machine. You decided to make a change to that machine, knowing that it's not the change that you would have preferred to make, but: "it's not a debt, it's not a loan, and the price (if there be any) of taking an alternate direction in the future is not "interest." In my opinion, the financial analogy fails.

If the team, in the future, decides to replace their stopgap work with something better, that is a brand-new task, consisting of first accurately removing the old construct and then accurately replacing it with a new one, finally verifying that the two are the same.

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  • Might help if you define what you mean by 'fails'. Keeping in mind that 'all analogies are wrong. Some are useful'.
    – Sarov
    Commented Jul 8, 2021 at 18:40

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