Hi, I have Commercial Property Loan of 7 lakhs with interest rate 11.5%, Right now interest is going aprox 40% of EMI, I have extra funds, so can I repay all loan amount or invest same amount in MF instead?
Ans: Deciding whether to repay your commercial property loan or invest the extra funds in mutual funds requires careful consideration of several factors. Here's a breakdown to help you make an informed decision:
Interest Rate on Loan: With an interest rate of 11.5%, your loan is relatively high-cost compared to potential returns from investments in mutual funds.
EMI Breakdown: Currently, around 40% of your EMI is going towards interest payments. By repaying the loan, you can eliminate this interest burden and potentially save money in the long run.
Investment Returns: While investing in mutual funds may offer the potential for higher returns compared to your loan interest rate, it also carries risks. Market fluctuations can impact investment returns, and there are no guarantees of achieving desired outcomes.
Risk Tolerance: Consider your risk tolerance and investment horizon. If you're comfortable with the risks associated with mutual fund investments and have a long-term investment horizon, investing in MFs may be suitable.
Financial Goals: Evaluate your financial goals and priorities. If becoming debt-free and reducing financial liabilities is a priority for you, repaying the loan may provide peace of mind and financial security.
Tax Implications: Assess the tax implications of both options. Loan repayment may not offer any tax benefits, while investments in certain mutual funds may qualify for tax deductions or exemptions.
Ultimately, the decision depends on your individual circumstances, risk appetite, and financial goals. Consider consulting with a Certified Financial Planner to evaluate the pros and cons of each option and determine the most suitable course of action based on your specific situation.
