There is a general confusion among people whether they should repay the existing loan or invest the money?. There is no rule says that either of the option is good, because it differs for each person’s capacity and the nature of debt or investment. In this post I will be writing down few points to consider while taking the decision. I would like to hear from you if you have the same confusion and your opinion. Subscribe to our future articles here.
Points to Consider
- As I told you, there is no separate rule for choosing the one. It purely depends on your financial strength and other factors. When you have the same situation, sit and do your own math to find the best option for you & your family’s future.
- Credit cards debts are very costly, it is good if you give priority to credit card and personal loans. Normal these kind of debts are expensive in nature.
- If you have loan with low interest rates, also you have a investment plan where you can make the good profit. Then you can go for investment.
- You have to be sure if the investment is not risky and will not affect your family if you loose the money. For example, you are investing huge money in Share Market, instead of closing the existing debts, that is too much risk.
Summary
I hope this tips will be useful to choose the best option for your project. If you have any doubts please post it in your comments section.
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December 28, 2009 at 8:56 am
I agree with krishna-it would depend on the context of each individual.
but the principal is common for any context–
if you can earn more post tax income by investing– then it makes sense to invest else it makes sense to reduce debt.
December 29, 2009 at 9:34 pm
Hello Krishnaji, my in- laws have one 600 sq ft flat in mumbai suburbs in his name but we don’t .Currently we are living in the same flat .My in laws have moved to some other small town to look after farming .The current flat /building we are living in ,was built in 1970 . It’s very close to station and shopping malls . Now one builder has come forward to construct new tower in our society , (after demolishing present 8 building that make society ,of course). he is offering + 15% area to every newly built flat of all society members.
One of the society members is selling his old flat for 32,00,000lacs . So we have thought that, we will buy this flat in our name and after construction, we will ask builder for bigger flat combining the inlaws + our flat area . Preesently ,we have cash (2,00,000rs )in our hand to pay to that person to buy the old flat .
Also,We have heard that from 2011 onwards , home loan will not help in saving taxes . If that is true ,what should we do?
should we take homeloan in husband’s name , to pay 3200000 lacs ? Will there be any point IN TAKING HOMELOAN , if flat will be in husband’s + inlaw’s name and if tax benefit on homeloan will be gone from 2011.
OR In newly costructed , buiilding if we go for 2 separate flats , live in a flat which would be inlaws’s name and give our flat to rent and show rental income – home loan interest . I s it possible to stay in the same bulding in father’s flat and rent out own flat for saving tax ? sorry I took long space here and your time ..thanks forlooking into my query.
January 4, 2010 at 3:10 am
I have also written a post on the similar topic, Please check it out and leave your comments
http://www.equitipz.com/2009/12/should-i-prepay-my-loan-or-invest-that-money.html