Prepay Your Loan or Invest? See Both, Side by Side
Enter your loan and the money you have. Type the yearly return you expect from investing — we never guess one for you. See prepay, invest and a split side by side, and the break-even return.
Example values shown — replace them with your own loan details. Both options keep paying the EMI; once the loan is cleared the freed EMI is invested at the same return. The return is the number you type, it is not guaranteed and can be lower or negative. Tax is charged only on the gain. Tax benefits on the loan itself are not counted. Reducing-balance loans only. Illustrative only, not investment advice.
How this calculator compares them
The same amount and the same number of years go into each option. In every option you keep paying your normal EMI. If you prepay, the loan ends sooner and the EMI that is freed up is invested from then on at the same return. If you invest, the money grows at the return you typed, minus tax on the gain.
At the end you see how much better off each option leaves you than simply keeping the money as cash. A prepayment charge, if your lender has one, is counted against the prepay option.
What is the break-even return?
Prepaying earns a certain return equal to your loan’s interest rate, because every rupee you do not owe stops costing interest. Investing has to earn more than that, after tax, to come out ahead — and unlike prepaying, it is not guaranteed. The break-even is the yearly return at which the two end up level.
Before you use the numbers
This is an illustration, not advice. Investment returns can be lower than you expect, or negative. Prepaid money cannot be taken back, so keep an emergency fund first. Tax benefits on loan interest, and the tax rules for your investment, are not counted here. Check your loan agreement for prepayment charges and confirm figures with your lender. It works for reducing-balance loans; gold and flat-rate loans work differently.
Frequently asked questions
Should I prepay my loan or invest the money?
It depends on your loan rate, the return you can expect after tax, how much risk you can take and how soon you might need the money. This calculator shows both outcomes for the same money and time so you can decide; it does not recommend either.
Why do I have to type the return myself?
Nobody can know future returns. A default would quietly tilt the answer, so you enter the number you believe and can test a few — for example a cautious one and a hopeful one.
What does the split do?
It sends part of your money to the loan and part to investing, for people who want some certainty and some growth. Change the percentage to see how the result moves.
Are taxes and charges included?
Tax on the investment gain and a prepayment charge on the loan are included if you enter them. Tax benefits on the loan interest, and any fees on the investment itself, are not.
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Estimates only, not financial advice. Rates are examples — actual rates vary by lender and profile, so verify with your lender. Calculator app, not a financial advisor.