Prepay Your Home Loan Or Invest It?

You feel the pull to just "get rid of" the loan. But the math isn't always in favour of prepaying.
Say you have a ₹50 lakh home loan at 8.5% interest with 15 years left. Put ₹1 lakh extra toward it, and you save roughly ₹1.9 lakh in interest over the loan's life and shave off about 5 months.
Now compare that to investing the same ₹1 lakh in an equity mutual fund averaging 12% over 15 years — it grows to nearly ₹5.5 lakh.

What this means for you

• If your loan rate is above 9-10%, prepayment almost always wins — guaranteed savings beat uncertain returns.
• If your loan rate is 7-8.5% and you have 7+ years of investing runway, equity SIPs likely outperform.
• Your EMI stays the same after prepayment unless you ask the bank to reduce it — tenure shrinks instead.

What you can do

• Check your current loan rate, then compare it to what a balanced mutual fund has returned over 10 years.
• Split the bonus — prepay a portion for peace of mind, invest the rest for growth.

There's no universally "right" answer here — only the one that matches your loan rate and your comfort with risk.

Grow with clarity 🌱