If your monthly earnings rise, you can enhance your financial circumstances more effectively. As your earnings grow, your savings will grow as well. You’ll possess more cash in your hand. Now the query is whether you ought to allocate the funds received from SIP or raise the EMI of your mortgage to expedite the repayment of the debt. Let’s respond to this significant question.
Option 1: Pay back the loan ahead of time
Advantages:
Decrease in financial anxiety linked to enduring obligations.
Significant reduction in interest payments from timely loan settlement
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The advantage of income tax exemption ceases with the early repayment of the home loan
Chances for potentially significant investment returns are overlooked.
Incapable of gathering money for upcoming financial crises or objectives.
Option 2: Place the funds in a SIP
Benefits:
Sufficient resources for urgent situations or various financial requirements.
Significantly greater earnings from compound interest compared to the interest saved through early repayment.
Investing in a variety of assets in equity markets acts as a shield against inflation.
Loss:
The profits are contingent on how the market performs, representing the risk.
Sticking to your investment strategy amid market changes requires patience and discipline.
Consequently, it is essential to evaluate both alternatives thoughtfully.
Adopt a balanced strategy
Loans ought not to be regarded as adversaries. A balanced strategy needs to be embraced between repaying loans and generating wealth. Financial planning must involve evaluating liquidity, returns, and risk.
