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Yogi Zone

Useful articles for your finance management by our team of experts

loan repayment

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Question:

I had obtained a home loan for 25L in 2008 from SBI and I am paying EMI of 25,500.

Currently in couple of months my old investment of 10L is getting matured.

Pls suggest

Option 1: Divert the investment to reduce the EMI.

Option 2: Re-invest the investment so that the return (interest) can used as part of my EMI and I will continue to pay my EMI.

Answer:

Assuming you are paying 10.5% interest per annum on your home loan, you should earn at least 10.5% p.a. or more on your matured proceeds to make it a meaningful investment. Otherwise, you may consider part-payment of your home loan to lower your debt burden.

In the present scenario, there are not many investments that earn you 10.5% p.a. return instantly. Therefore, it would be wise to make part-payment of your home loan and lower your debt burden as much as possible, unless you have other financial goals for which you need to allocate money.

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