Offers
Rates
V-KYC
Debit Card Related
Credit Card Related
SA Welcome Kit 
Manage Mandate(s)
Get Mini Statement
categories
Bloggers
Blog collection
Press Release
Should I pay off my home loan or invest?
Posted on Friday, January 6th, 2023 | By IndusInd Bank
Priyanka bought a new apartment a few years back and availed a home loan to buy her dream house. She now has an additional Rs. 15 lakhs in hand, and is confused if she should use this money to pay off her home loan or invest it. The elders in Priyanka’s family advised her to repay her home loan as it is not good to have a debt. Some of her colleagues suggested her to invest her money where she earns high returns.
Many of us have been on this crossroad.
If you are facing the same dilemma, then you’re at the right place. In this blog, we will help you decide what you should do – pay off your home loan or invest your money.
Prepaying home loan vs Investing: Factors at play
There are several factors that you need to consider when choosing between loan prepayment and investment. The prominent ones are: –
- Interest Rate on your home loan – If your home loan interest rate is higher than the interest you may earn on investments, it is better to pay off the remaining loan amount. Doing so will clear your liability and may give you peace of mind. Once your loan is paid off, you will have your entire monthly income to invest from that stage onwards.
- Interest Earnings on your investment – If the interest rate on your savings is higher than your home loan interest rate, investing your surplus money can be a smarter choice. Continuing with your regular EMI while earning high interest on investment will increase your wealth.
- Tax deductions on home loan interest – You can claim tax deductions of up to Rs. 1.5 lakh per financial year on the principal repayment portion of the EMI under section 80(C). You can also avail deductions on the interest paid under section 24(B) of the Income Tax Act.
Apart from this, you can also consider the outstanding loan amount, the remaining loan tenure and your monthly income after taking care of all expenses before taking a call.
Conclusion:
A lot of earning individuals lean towards paying off their home loan when they have extra funds with them. They see home loans as burdensome debt and want to come out of it as soon as they can. However, it is important to remember that with home loans, you can also avail tax benefits that reduce your total tax outgo. You can also invest in IndusInd Bank’s tax-saving FDs to claim additional deductions.
Additionally, you should invest in equities as it has the potential to generate higher returns while continuing with the regular EMI. This can work well until the difference between the investment returns and home loan interest rate is reasonable.
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.
