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Every home owner thinks this sometimes. Should the home loan be repaid early or should the money be invested and let it grow? There is no definite answer to this. The right decision depends on the interest rate on your loan, your risk appetite and what you want to achieve with your money in the long run.

When is it beneficial to repay home loan early

If your home loan is at a high interest rate like above 9% then repaying it early can be a good option. The definite benefit of interest savings can be more than that of ordinary fixed deposits or low-risk investments. Apart from this, mental relief is also provided. Having the home completely yours means lower monthly payments and financial freedom. This step is especially important if you are nearing retirement or do not like to carry debt.

When is it better to invest

If your home loan interest rate is low like 7% or less and you are comfortable taking some risk, then investing can yield higher returns in the long run. For example, equity mutual funds can give an average return of 1012% per annum in the long run, which is more than the savings from prepayment. This plan is suitable for those who have regular income, emergency fund and adequate insurance to protect against risks.

mental aspect

Not just on figures, mental satisfaction is also important. Some people sleep peacefully without loans, even if the returns are low. Some people feel safe keeping their money invested. The main thing is that you should choose an option that gives you a feeling of security, not worry.

take a mixed approach

You do not need to choose just one option from the entire amount. Sometimes you can make prepayment in small installments and continue investing at regular intervals. This will reduce the tenure of the loan and the compounding benefit will also remain in the long run.