Invest vs Repay Calculator

Analyze whether it makes more financial sense to prepay your existing loan or invest that money for higher returns.

Opportunity Cost Matrix

Loan Details

₹
%
Yr

Surplus Details

₹
%

Clear Winner

Invest the Surplus

Leaves you with ₹9,44,274 more net wealth at the end of 15 years.

If you Invest

Total Interest Paid

₹19,31,328

Final Wealth Created

₹50,45,760

If you Prepay

Total Interest Paid

₹10,14,050

Final Wealth Created

₹41,01,486

Base EMI
₹24,618
Months Saved (Prepay)
78 months

Advisor Note: If your expected investment return (12%) is higher than your loan interest rate (8.5%), math favors Investing.

However, prepaying a loan offers guaranteed, risk-free savings. Investing relies on market performance. If being debt-free gives you peace of mind, prepaying is emotionally superior.

The Math: Guaranteed Return vs. Equity Risk Premium

Prepaying a loan gives a 100% risk-free, tax-free return equal to your loan interest rate (e.g. 8.5% p.a.).

Investing that same money in equity mutual funds has historically returned 12% to 14% CAGR over 10+ years. The 3.5% to 5.5% annual return differential compounded over 15–20 years often generates millions of rupees in extra net wealth.

The Decision Framework

  • Prepay First if: Loan interest rate is > 9.5% (personal loans, credit cards) or debt stress impacts your mental peace.
  • Invest First if: Loan interest is < 8.5% (home loans), you receive tax deductions under Sec 24(b), and your horizon is > 7 years.
  • The 50/50 Strategy: Split surplus 50% towards prepayment and 50% into SIPs to balance debt reduction with compounding.

Frequently Asked Questions (Invest vs Repay FAQ)

Why do high-interest loans always come first?

Credit card debt (36–42% p.a.) and personal loans (12–18% p.a.) have interest costs far higher than any realistic long-term investment return. Always pay off high-cost unsecured debt before investing.

What is the "Hybrid 50-50 Approach"?

Rather than choosing all-or-nothing, split your surplus: put 50% towards annual home loan principal prepayment and 50% into an Equity Index or Flexi-cap SIP.

How does liquidity differ between prepaying and investing?

Money prepaid into a home loan is locked in the property equity and cannot be easily withdrawn for emergencies. Money invested in mutual funds remains liquid and can be redeemed in 2–3 business days.

Does psychological peace of mind outweigh the math?

For many individuals, being completely debt-free provides immense emotional peace of mind that exceeds pure mathematical optimization. If debt causes anxiety, prioritizing loan closure is valid.

Related Calculators

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Calculate how much interest you can save and how your tenure reduces by prepaying your loan with our free prepayment calculator.

EMI Calculator

Calculate your monthly loan EMI with our free EMI calculator. Estimate repayment amounts, total interest, and total payable amount easily.