Should I pay off the loan or invest the money elsewhere?
I’m 26 and took an Education loan of ₹4,20,000 in Sep 2021. The current outstanding amount is ₹5,00,000 after paying EMI for 15+ months at a 10.15% floating interest rate. I’m in a position to pay off the entire amount today. Should I pay off my entire loan or Invest?
i would say pay off. to break even with 10.15% loan interest you have to invest somewhere with ~ 14 % return considering 30% tax
Hmm.. was thinking of that only.
Interest for education loan is tax deductible as well.
I was in the same boat as you some time back.
However I decided to increase my monthly payment to 20k per month instead of emi of 4500. I was able to finish the loan in less than 3 years and was able to make good amount of money through mutual funds and direct stocks.
Market scenarios are different now the return might vary now. However I am curious which bank gave you education loan at 10.5%. It is less than 9% for most of the banks now.
Check whether your bank reduced the interest rate after RBI decreased the repo rate. If not then mail them and if they do not respond then you can complain to RBI Obdusman. They will have to return the extra interest charges + a good amount of penalty will be paid to you
Bro what to say.... Loan was from SBI Bank and earlier the intrest rate was above 12%. Its floating rate so the current rate is 10.15.
Any kind of debt should be a priority to clear out ASAP.
You can do it in 2-3 big payments rather that putting all in one time, so as to manage some investment alongside.
But honestly, you cannot beat interest on a loan with any kind of investment that will set-off that lost money sometime later, considering mental burden as well.
Education loan is a good loan, allows interest to be deducted from salary
OP confirmed, not in taxable bracket.
And when he gets into tax bracket, he has more leeway than others
You can peacefully focus on investing once the debt is clear.
Question - Will you be left with money after paying off the loan?
If I clear the loan i still be in debt 😂😂 as my friends are helping me with it at zero interest. If I pay off the loan I'll be left with only emergency fund. I'll start fresh then afterwards.
Clearing maximum debt without touching emergency funds could be the safe option then, isn't it?
Pay it off, peace of mind >>>>> money
Yes. The biggest benefit in this EMI world nowadays is being debt free and having a peaceful life.
Just pay it. Education loan is just title only. It's almost a personal loan. In my case I paid 40 thousand evey month and paid of entire loan in 6 months. The I moved to next goal to make house for the family and wedding.
I had ₹15 lacs education loan, I used the interest for 3 years for 80E while accumulated the amount and prepaid a few EMIs.
I paid off the whole amount now. I'll say if the tax deduction is helping you then keep it for some time but if not pay it off. Your interest is quite high too, for me it was 6.75%
Thanks 😇. But my salary doesn't comes under tax range. I am just a fresher. And the interest rate hurts the most although I have taken form a PSU Bank. 🥹🥹
