When should I prepay instead of investing?

Prepay high-interest debts (personal loans, credit cards, auto loans >10%) immediately because paying off 10%+ debt gives a guaranteed, risk-free return equal to the interest rate. For low-rate home loans (~8%), long-term equity investing (12-14% CAGR) often creates higher long-term wealth.

Prepayment vs. Investment Calculator

Loan & Investment Details

Amount to Prepay/Invest

₹

Remaining Loan Amount

₹

Loan Interest Rate

Remaining Loan Tenure (Years)

Expected Investment Return Rate

Decision Analysis

Better Option

Prepay the loan

Net Benefit of a Better Option

₹0

Interest Saved

₹0

Investment Gains

₹0

Guide & Methodology

About the Loan Prepayment vs. Investment Calculator

Decide whether to prepay your debt or invest spare cash in mutual funds by comparing post-tax borrowing costs with investment returns.

What this calculator does

Compares guaranteed interest savings from prepaying a loan against potential compounded market returns.
Factors in tax deductions on home loan interest under Section 24(b) vs. capital gains tax on investments.
Reveals the mathematically optimal financial decision for your surplus funds.

How it Works & Key Inputs

Step 1

Loan Parameters

Input loan balance, interest rate, and tenure.

Step 2

Surplus Funds & Investment Return

Enter available capital and anticipated equity/debt return rate.

Step 3

Tax Adjustments

Account for tax savings on loan interest and LTCG on investment profits.

Core Calculation Parameters

Loan Interest RateCost of borrowing (guaranteed hurdle rate).

Expected Investment CAGRAnticipated compound growth rate of equity/mutual funds.

Formula & Calculation Logic

Mathematical Model

Net Advantage = Investment Future Value - (Loan Prepayment Interest Saved + Tax Differential)

Comparative opportunity cost financial model.

Variables Breakdown

Hurdle RateEffective post-tax loan interest rate that investment returns must beat

Frequently Asked Questions (FAQ)

Disclaimer: This calculator is provided for educational and illustrative purposes only. Actual financial outcomes may vary based on statutory changes, lender terms, fund fees, and prevailing market dynamics.