Every loan owner have this question once in their life whether to prepay their loan amount with the cash they have or should they invest in stocks. Now let's take a Home loan because that's the loan people take with the maximum amount.
So if someone has taken a loan of 50 Lakhs for 8.5% interest and the tenure is 20 years, he has to pay around Rs 43K every month as an EMI. Now if he has some money saved up or if he got a bonus, he can think of either prepaying the loan or invest that extra amount in the stock market. When he prepay the loan, he will save guaranteed 8.5% on interest. But if he invest in the stock market he can get more than 10% returns.
Now why I am saying can because market has certain risks and it will not always give more than 10% returns. So it's upto the individual whether he wants to prepay or invest. If his risk appetite is not much, he is investing most of the money in FD, for him thr best is to get rid of the debt and be stress free. But if he is ok with the risks associated with the stock market and has a time horizon of 5 to 7 years then most likely he can get more than 10% returns.
So it's not that we should always l9ok for numbers to see if we have to prepay or invest. Not everything fits for everyone. So if you want to get rid of the debt as soon as possible then prepay as much as possible. And if you want to create wealth as soon as possible. Then aggressively invest and continue with the EMI. Please watch yhe video and let me know your thoughts on the same.
