Should I invest my bonus or off retire the home loan which I am servicing?
If you are new to investing, then you may be better off retiring the loan and then consider investing regularly
I have a home loan of Rs 30 lakh of which only Rs 4 lakh is left unpaid. I am expecting my bonus in two months, which should work out to about Rs 3 lakh. Should I invest this money or repay the remaining loan amount?
Kiran Shetty, Mangalore
The payoff between investing and retiring debt is not as easy as it may appear. A lot of the decision will depend on your current financial state, future financial goals, your age and more. So, before jumping into any decision – ask yourself if you will earn more from the investment than the cost of the loan. The answer will emerge once you analyse this aspect. Moreover, when you are servicing a home loan you get the benefit of interest on housing loan as deduction at the time of filing of your income tax return. If you are new to investing, then you may be better off retiring the loan and then consider investing regularly the sum that you would save which would have otherwise gone towards servicing the home loan EMIs. In this manner, you would get into investing on a positive note of not servicing any debt, which gives you the freedom to plan your investment for a long term. You could select funds to invest in from the OLM Elite list, based on your risk profile and comfort to investing.