Invest in Fixed Deposit or Prepay Your Home Loan, What Should You Do?

Fixed Deposit or Prepay Your Home Loan

For many people, the dilemma arises whether to invest their surplus funds in a fixed deposit (FD) or use that money to prepay a portion of their outstanding home loan. Both options have their advantages, and the decision ultimately depends on your financial goals and circumstances. In this article, we’ll explore the benefits of each option and provide insights to help you make an informed decision.

Benefits of Fixed Deposits

Benefits of Prepaying Home Loan

Which Option is Better?

The decision between investing in an FD or prepaying your home loan largely depends on your financial priorities and the interest rates involved.

Consider this example: Suppose FD interest rate is 9%, and the home loan interest rate is around 8%. In this case, it may be more beneficial to invest in an FD, as the returns would be higher than the interest savings from prepaying the loan. However, this approach is only viable when you have a good monthly surplus.

The Practical Approach

Practically, it would make more financial sense to channel your surplus funds towards prepaying the home loan. This approach allows you to reduce your overall debt burden, freeing up a higher monthly surplus that can be invested in a disciplined manner in the future. Additionally, being debt-free provides a sense of financial security and peace of mind, as you no longer have a significant debt servicing liability in your life.

Disclaimer: (This information is provided solely for informational purposes. It is important to note that investing in the market or a business idea involves market risks. Before investing money as an investor/ owner/ partner, always consult an expert. DNP News Network Private Limited never advises to invest money on stocks or any specific business idea. We will not be liable for any financial losses.)

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