Repay Home Loan or build up an FD
I am in IT. Earning 3L/pm. I also work on a side hustle giving me ~50k pm. Age 25. I have a home loan of 60L, for 20yrs, emi 55k pm . I've built up ~20L emergency fund through savings+RSUs+PF. Recently I got 10L JB after job switch. I want to know if its better to put this 10L as home loan prepayment (HL emi is 7.5%) or should I put it in a scheduled bank (interest 8%). Please let me get to the decision.
Ps: I haven't done the calculations needed for this 😐
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You do realise that no fixed deposit gives you 8% and any interest will be taxed as per tax slab. Assuming 30+% given your salary.
What are the charges for loan prepayment? There might be a penalty.
Most small finance banks pay more than 8%
If in doubt, or data analysis paralysis, just split. 5L in prepayment, 5L in equity mf.
Remember that nobody ever in your entire life is going to loan you 60L at just 7.5% unless you're buying another home. This is THE CHEAPEST loan.
Also remember that money becomes a little more worthless every year. In India about 6-8%.
Keep 1-2yrs of EMI stashed up somewhere. Pay up home loan when interest rate is like 9-10%. Before that it isn't worth it.
Rather get something nice for yourself and family. You'll remember it for longer than skipping a few EMIs.
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Calculate interest by reducing the years and find the sweetspot of emi , then decide to create fd