Investing vs. Loan Repayment: Making the Right Financial Decision

💼Fixed obligation to income ratio (FOIR) is key when deciding between investing and loan repayment.

🏦Comparing the returns from investing in FDs and mutual funds with the interest rate on your loan can help determine the better option.

📈Over a long period of time, investments like index mutual funds and equity can outperform the interest rate on your loan.

🔒Factors like nearing retirement, high loan interest rates, peace of mind, and the loan's age can influence the decision.

🧮Calculating the potential savings and gains from loan repayment and investment can help guide your decision-making process.

Should I invest my extra income or use it to repay my loan?

—Consider factors like interest rates, loan type, investment options, and personal goals to make the right decision.

What are some investment options to consider?

—Options like index mutual funds, equity, PPF, Sukanya Samriddhi Yojana, gold, and commercial papers can offer potential returns.

Are there any exceptions to the general rule of investing over loan repayment?

—Exceptions include nearing retirement, high-interest loans, seeking peace of mind, and having a loan duration of fewer than five years.

How can I calculate the potential savings and gains from loan repayment and investment?

—Use Excel calculations or financial tools to estimate the interest saved on loan repayment and the returns from investments.

Are there any risks involved with investing in the stock market or mutual funds?

—Yes, investments in the stock market and mutual funds come with market risks, and actual returns may vary.

00:00Introduction by CA Rachana Ranade.

00:31Video focuses on the comparison between investing and loan repayment.

02:21Different types of loans and interest rates are discussed.

07:47Calculations demonstrate the impact of reducing the loan tenure.

10:59Comparison of returns from investments like index mutual funds and equity with loan interest rates.

14:19Option 1: Reducing the loan tenure, example calculation and comparison of savings.

16:13Option 2: Investing the surplus in equities or mutual funds, example calculation and comparison of gains.