Should you repay the loan in EMIs or make a lump sum payment? Live calculator compares total interest cost vs investment opportunity cost.
| Factor | EMI Route | Lump Sum Repayment |
|---|---|---|
| Total Amount Paid | Principal + Interest | Principal only |
| Cash Flow Impact | Fixed monthly outgo | Large one-time payment |
| Liquidity | Preserves savings | Depletes savings |
| Opportunity Cost | Invest freed cash | Lose investment returns |
| Interest Saved | Nil | 100% interest saved |
| Best When | Good investment returns available | Interest rate > investment return |
The decision depends entirely on the gap between your loan interest rate and your expected investment return. For high-rate debt (personal loans 15–24%, credit cards 36–42%), lump sum repayment almost always wins. For low-rate debt (home loan 8.5–9.5%), investing instead can generate more wealth over 15–20 years.
If your home loan is at 9% and your equity SIP earns 12–14%, investing is mathematically better. But emotional peace of mind from being debt-free has real value. A balanced approach: invest 70% of surplus in equity, use 30% for home loan prepayment.
Personal loans at 12–24% APR are high-cost debt. You need investment returns of 16–30%+ to beat paying it off. Almost always pay off personal loans first before investing aggressively.
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