extra income
If your monthly savings increase then you can strengthen your financial position in a better way. Your savings will increase as your income increases. You will get more money in your hands. Now the question is whether to invest the money that is coming in SIP or increase the EMI of home loan, so that the debt gets cleared soon. Let us answer this important question.
Option 1: Premature Loan Repayment
Advantages:
Reduction in financial stress associated with long-term debt. Big savings in interest due to early termination of loan.
Loss:
If the home loan is closed early, the benefit of income tax exemption stops. Opportunities for potentially higher returns from investments are missed. Unable to accumulate funds for future financial emergencies or goals.
Option 2: Invest the money in SIP
Advantages:
Adequate funds for emergency or other financial needs. Much higher returns from compound interest than interest saved by prepayment. Diversification of funds in equity markets provides a hedge against inflation.
Loss:
Returns depend on market performance, which is the risk. Sticking to your investment plan during market fluctuations requires patience and discipline. Therefore, one should consider both the options carefully.
adopt a balanced approach
Loan should not be considered an enemy. A balanced approach should be adopted between loan repayment and wealth creation. Financial planning should be done by assessing liquidity, returns and risk. You can choose a path that ensures both peace of mind and long-term prosperity. Use discipline and the power of compounding to turn financial challenges into growth opportunities.
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