Question 1

Should I prepay my home loan or invest in an equity SIP?

Accepted Answer

Prepaying a home loan gives you a guaranteed, risk-free return equal to your loan interest rate (8.5% - 9.5%), whereas investing in equity SIP offers potential historical compounding returns of 12% - 15% with market volatility. A hybrid 50:50 strategy often balances risk mitigation with long-term wealth creation.

Question 2

How does Section 24b tax deduction affect loan prepayment decisions?

Accepted Answer

Under the Old Tax Regime in India, interest on home loans up to ₹2,00,000 per financial year is deductible under Section 24b. If you prepay your loan, your annual interest may drop below this threshold, reducing your tax savings. This calculator factors in your tax bracket to give your true post-tax effective return.

Home Loan Prepayment vs. SIP Calculator Prepay Loan or Invest in Mutual Funds?

Home Loan Prepayment vs. SIP Calculator
Prepay Loan or Invest in Mutual Funds?