Loan Prepay vs Invest Calculator
Should you use your bonus or lump sum to prepay your home loan โ or invest it in equity? Find out with real numbers.
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How this calculator works
The classic personal finance dilemma: your home loan charges 8.5% interest, but equity returns 12% historically. Investing seems better โ but after tax, your net equity return may be lower. And loan interest saved is guaranteed, while investment returns are not. The right answer depends on your loan rate, expected returns, tax bracket, psychological comfort with debt, and whether the loan is for home (tax benefits) or personal use (no benefit). This calculator gives you the pure mathematical comparison.
Interest saved = Lump sum ร ((1 + loan rate)^years โ 1) | Investment corpus = Lump sum ร (1 + invest rate)^years | Net advantage = Investment gains โ Interest saved
Last updated: March 2026 ยท Rates and slabs updated for FY 2025-26
Home loan gets tax relief
Home loan principal repayment (80C) and interest (24b โ up to โน2L for self-occupied) are tax-deductible under old regime, improving the effective loan rate.
Rule of thumb
If invest rate โ loan rate > 3%, invest. If < 1%, prepay. Between 1โ3%, consider your risk tolerance and the loan type.
Psychological value of debt freedom
Math may say invest, but being debt-free has real psychological value. A hybrid approach โ invest 60%, prepay 40% โ often works best.
Frequently Asked Questions
Home loan principal repayment (80C) and interest (24b โ up to โน2L for self-occupied) are tax-deductible under old regime, improving the effective loan rate.
If invest rate โ loan rate > 3%, invest. If < 1%, prepay. Between 1โ3%, consider your risk tolerance and the loan type.
Math may say invest, but being debt-free has real psychological value. A hybrid approach โ invest 60%, prepay 40% โ often works best.