Every human being, even a financial expert is unable to decide whether paying loan or investment from your surplus money.
We will try to explore this topic in this article and drive the reader to take the decision looking at future prospectus.
Paying loan or investment – a difficult choice to make
After reading this question, you must take a while to answer the question.
The selection is yours, but every choice open several doors and close several doors.
Let’s take an example:
You are planning for vacation this summer, after all your financial planning it cost you around ₹ 2 Lakhs, you have two choices.
Withdrawn your fixed deposit or apply for personal tour loan:
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Both segments are different, you have to decide whether you have to be debt free or you are happy with EMIs.
Understand why we invest?
Investment is the process of putting your surplus money, which will in future add up and enhance your saving.
Why we do so?
Investing means building a reserve that can protect you and your family and provide you with sources of passive income which will help you in your retirement.
Investment also keeps your life luxurious and comfortable and also fulfill your future desire like a big house, a beautiful house, holiday with full amenities.
What is Loan and how it works for you?
The loan is a financial support for outside sources to accomplish your financial demand like buying a house, buying a car, children education, personal desire.
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Is loan really needed?
There are some basic needs which cost to the higher side, it would be difficult for the middle-class person (best example is a house) to afford it.
Home Loan is the best approach for the person, to get all he wants in return is EMIs.
The loan amount is converted into several mini parts along with interest, which required to pay back in monthly installments from the leader.
Pay off your debt or invest it (decision time)
Every working or nonworking person definitely have some savings or in a form of investments and also holding is the burden of EMIs.
Suddenly you receive some healthy sum of money, what would be your approach?
What should you do?
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There are only two approaches available whether you pay off your debt and become debt free or invest the sum of money.
- Approach A: The rate of interest you are paying on your debt.
- Approach B: The rate of return you will earn from your investment.
- Approach C: Approach C is slightly ticky, it will depend upon the middle way decision taken by you.
(Putting some money in investment and pay off some of the debt) depending upon the decision weightage.
In simple words: If you will earn a higher return on your investment then you are paying your debt, it is better to pay off your debt and become a debt free man.
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Some of the intelligent investors or financial planners approach is different towards their loan and investment.
Bottom Line: Decision Making
While analyzing the situations some of the basic points you need to remember:
- Are you in mental peace, and sleep well in the night.
- You’re likely to stick with until it’s completed.
- you want to live the luxurious life – is it really important.
- The investment will in the future give you security and standard life.