Investing vs Loan Repayment | 2022 | CA Rachana Ranade

[@CARachanaRanade]

About the prepayment penalty short description with link economictimes.indiatimes.com/wealth/personal-finance-news/rbi-restricts-banks-from-charging-prepayment-penalty-on-home-loans/articleshow/12711108.cms According to the RBI rule, banks are not allowed to charge you prepayment penalties on home loans.

[@anilkumar-od6gd]

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[@anilkumar-od6gd]

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[@anilkumar-od6gd]

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[@anilkumar-od6gd]

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[@anilkumar-od6gd]

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[@gchirag96]

Being a chartered accountant, in my opinion, it's always better to knock off your loan first. It's very fancy to say that you can get 15% return from index and all but it doesn't work in that way. There are no return in straight line and you may face 2 to 3 years without having return while on the other hand you are paying hight interest in initial years. Every decision should not be taken solely based on calculations only. It's good to have a good sleep if your leverage is controlled. It's my opinion only, you may or may not agree.

[@clydenferns]

I agree.. knock off the loan 😅

[@orophile_awlan]

Spot on

[@globalehsadvice7282]

YOU ARE RIGHT AND EVERY BODY DO NOT KNOW ABOUT INDEX

[@nipunagrawal2050]

15% is also a pre-tax return, post tax returns would be lower especially in the 30% bracket. That woule be the right apples to apples comparision.

[@jabursayyed4586]

very true. the returns are substantial after atleast 5 years of investing in etf. until then its always a tilt between marginal gain and loss . repaying loan also increases the chances of taking another loan for another asset while etf investing won't get you a loan.

[@deepakagrawal1189]

I had preferred to close home loan and ignore all this maths. I have definitely peace of mind. :)

[@deepakagrawal1189]

@whatsap9593 Bro, get lost... :D

[@sagargulhane2100]

Worst worst 😂

[@dnisha1000]

Good

[@prabhagaikwad4849]

Same here. People won't understand peace of mind until they get rid of the loan

[@Rk-gk4tk]

Nice decision

[@shyamsundar7679]

Mistake 1: You missed taxes on the 47 lakhs. Even if it is invested for longer duration, LTCG has to be calculated and reduced from the 47 lakhs. Mistake 2: when dividend payout and taxes on dividend is not even considered.( I don't know, whether you are considering 14% returns including dividend) Mistake 3: current home loan interest rate in indian bank is 8.8% (Already RBI increased interest rate thrice without publicity) Mistake 4: ETF & MF returns are subject to market risk, so you used only best returns rate for the calculation. You must project 3rd option with worst returns on ETF & MF.

[@mathebulamkhize876]

Making money is not the same as keeping it there is a reason why investments aren't well taught in schools, the examples you gave are well stationed, the market crisis gave me my first millions, people shy away from hard times, I embrace them.. well at least my advisor does lol.,

[@mathebulamkhize876]

@Billie Heeter Ury Not at all, having monitor edge my portfolio performance which has made a jaw dropping $473k from just the past two quarters alone, I have learned why experienced traders make enormous returns from the seemingly unknown market. I must say it's the boldest decision I've taken since recently

[@mathebulamkhize876]

​@Raul Romero The adviser I'm in touch with is ' Gary Craig Raymond ' He works with Merrill, Pierce, Smith incorporated and interviewed on CNBC Television. You can use something else, for me his strategy works hence my result. He provides entry and exit point for the securities I focus on

[@akshaykumargowdar9122]

my way to handle this is don't buy property until you have 40% cash with you. repay the loan within 5 years or atleast a large chunk of principal. don't invest on stocks sip etc. always invest on land like sites in outskirts of city, farm land n earn tax free income from farm land

[@Vj45459]

I have 90% but I will only pay 50% as DP and Invest the remaining in MFs for the loan term.

[@SettyS2011]

The problem for lot of people is to find the right investment carriers that will give the 10-15% returns. Hence in my case also I chose to put all excess in home loan prepayment.

[@vikramkumarp]

If the loan interest rate is above 10% simple go ahead and clear loan don't listen to anyone.. it's not about returns it's all about peace of mind

[@akashdidwania4985]

Relying on possibility of equity returns can be fatal. As returns from equity is probable profit but loan interest is certain liability. Moreover, we should not assume that income will increase continuously and the expenses will not. This is just my perspective to repay as much principle as possible in the initial 5-7 years when the maximum interest amount is due to be paid. After this tenure, spare amount investment in equity would be a good proposition.

[@figueroacamarillo98]

I'm 58 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, we are finding it impossible to replace it. We can get by, but cant seem to get ahead. My condolences to anyone retiring in this crisis, 40years nonstop just for a crooked system to take all you worked for

[@yarboroughbrad3082]

I think it's especially difficult for retirees and near retirees, I know to focus on the long term but the anxiety when you're supposed to be retiring in 3-5 years is exhausting.

[@ishaandevaj5587]

I feel your pain mate, as a fellow retiree I’d suggest you look into getting loan from "World Quest Finance, I am keep buying stocks every time they go down 2% - 5% making my average lower and lower each time.. I just spend $1000 today on one of the stocks that I own and my average now is $1.39 and current price of stock is $1.33 … Now, I just wait and if it goes more down I’ll buy more

[@ferreiraazevedo8861]

@@yarboroughbrad3082 While saving for a retirement is an important topic, it’s at least as important as what comes next: Your plan of action once you enter retirement. No matter how well you save during the accumulation phase, it’s critical to plan how you convert those assets to income.

[@coffmanleonel6227]

@@ishaandevaj5587 Every individual needs funds to grow their business. For you to be a successful entrepreneur, you need to get extra money to boost your business. Getting a loan will allow you to make an extra move to expand your business. thanks for sharing

[@tiffanyjordan5188]

I realized something wicked was on the way 5 years ago , but I never imagined it would be so catastrophic I worked in a big hospital for 28 years , the BOD stripped our hospital to bare-bones and cut my hours drastically. Fk this, I felt the longer I stayed in HawAii or anywhere in the US , I was digging a deeper hole. my cobra payment was $600 a month. Luckily I was 62 and could retire early and then I moved overseas. Aloha

[@ShoaibMohammad07]

Investing may or may not help you to get return. But loan repayment will certainly help you reduce the loan amount

[@satysharma8020]

Repayment of loan for sure,nothing better than being debt free for a peaceful life Teacher Ji.

[@darpanpatel259]

Highly informative and well thought 😊

[@pavitra4621]

Acche stocks choose kiya hai... Wow ... Your Love towards stocks market make us go crazy, students love towards subject depends on the teachers love towards the subject

[@chandrakantsoni8967]

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[@sharonrobinson4205]

You're the reason why I'm a consistently profitable trader 🎉

[@sarahcarsley7893]

Trading with Mr Logan has changed my life because he has recovered all of my trading losses.

[@mahiiengg]

@chandrakant Soni.. you better go and beg on streets rather fooling people

[@pranjal.pathakji]

Directly calculating the 30% tax savings on interest paid is not the ideal option because there is a 2 lakh maximum exception and most interest paid in a single year exceeds 2 lakhs. We do not receive the entire interest payment exemption. 15:25

[@SAGARTHAKUR-zn7vq]

Correct.

[@AkashKhanwalkar]

Thank you so much for sharing your expert views. The "peace of mind" factor is rarely considered by experts.

[@imranshaikh1824]

Mam aap jab bolna start karte he to usme hi itni ful energy dikhai deti h ke wo sher raftar kiyu nahi pakdega.....thanks k upar wale ne hamari life cheng karne k liye aap ko banaya

[@meghrajchavan7543]

I was looking for this type of video as it was difficult for me to actually analyze these many angles.. Really nice explanation in easiest way. Now I can check my case by my own.😀 Thank you very much Mam!!

[@Gathering_wisdom]

This sounds soo got damn foolish mam🥲🥲🥲🥲 don't give us false hopes looking at the past .. inflation has increased more than people's salary all the time🥲 if salry increased inflation has increased twice there is no way we would be able to effectively reduce years on loan🥲🥲🥲 plzz give us better option don't give us false hopes

[@learnnnjoy...]

Thanks for the insightful video! It shed light on the nitty-gritty of loan repayment vs. investment, including the often-overlooked factor of changes in home loan interest rates. Once again, Thank you, @CARachanaRanade Jee !

[@navs432]

What is not being factored into all of these options and calculations is Risk - Life comes at you in a thousand ways...always better to become Debt free at the earliest possible timeframe , and is one of quickest way to build wealth afterward provided you make wise investment decisions.

[@the_alpha_men]

Dono hi options situation ke hisab se bahatarin hai Thank you mam

[@pranavagarwal6916]

Loan on fixed asset is always better than investment in other option.... U have not taken into account appreciation of the asset (in this case House ). After 15 years value of the house will also increase ... Lets say after 15 years house valuation has increased to 1.5cr .... In india 200% increase in house valuation after 15years is very likely... In a good Neighbor.... So effectively taking a home loan or any kindy of property loan is a win win situation

[@dipjyoti1fast]

Just want to mention - hope everyone is also considering the rent you save or gain from the purchase. The property valuation is also a point to consider, some properties may get a 2X valuation by 7 to 12 years from purchase.

[@basantchoubey5137]

The challenge is cash flow.. Is there a guarantee that a good cash flow will continue for foreseeable future.. In that case, it's better to invest the money rather than paying debt.. But if there is risk to cash flow, priority should be given for loan payment.. Statistically last couple of centuries, most of the business busted due to debt which they were not able to serve during bad times..

[@ssmaitra1]

CA Rachana has illustrated the comparison based on "absolute interest". Impact of LTCG/STCG on investment returns was not considered in the discussion. An alternate viewpoint is to take time value of money into account i.e. look at XIRR of combined EMI & SIP installments + tax saving every year + LTCG/STCG at the end. Put all the projected cashflows of EMI, SIP, Tax Saving, LTCG etc. into a spread sheet and calculate the estimated XIRR. Think of the whole scheme of things as a "single investment product" with incoming and outgoing cashflows. If XIRR is negative, it's unlikely the scheme will be beneficial. Assume Home Loan interest rate of 10% & SIP return rate of 12% to keep some margin of error, in case you go wrong on estimating interest rates.

[@WARRIERSTAXANDLAWS]

Very nice presentation Rachana ji … it’s useful also . I am joining as an investor for ur class . I am also a lawyer and expert in taxation and laws . Very much impressed abt your efforts 🎉🙏🏻

[@arjunprasad3945]

Actually in option 2, the difference is considerably(10%) more. Because over 15 year period through tax benefit on additional interest, he could have afforded to start an sip of 1500 per month for 15 years(2.7L, but yes tax benefits are also having the same compounding effect cannot be linear, but for simplicity). If he invest it in same index fund at 14% for 15 years. At the end of it, that 2.7L would have grown to 9L. So basically with option 2, it is 41.8L + 6.3L = 48L.

[@absash7838]

In the first option the return will be further reduced because by the time the first 15 years pass the market would have reached a new high. Index stocks would be very costly to begin with.

[@dranoopshende3540]

I was going through the same confusion since last few days. But this video as answer my all queries. Thanks a ton CA Rachana Ranade. Keep the grt work going. All the best 👍

[@shashank521]

The same doubt was jumping in my mind for quite some time now. Thankyou for beautifully clarifying it to me. 😇

[@aninditasarkar9579]

I am really impressed by your videos. I wish you become our future finance minister..

[@vivekduttm]

Good stuff!! Very logical

[@ashokvyas3077]

Very well explained

[@utkarshkothimbire1484]

Thanks a lot for making this video. Now it is easy to take a decision for whether we should go with repayment of loans or investing. As my age is below 30 and I can be invested for a longer duration I will opt for Investing rather than paying loans beforehand.

[@nirajkumar-tl2ic]

you should have shown comparisons with 12% return too. 14% is way too high return which is practically rare.

[@guruprasadk738]

I am doing option 2 & I am loving it 💰💰💰💰💰💰💰

[@yashgulati5084]

Amazing Teacher and have understood how to analyse stocks fundamentally

[@CARachanaRanade]

Thank you 😊

[@IamMangesh]

I have planned to re pay Home loan as paying Extra EMIs at end of Year, At list 1-2 EMIs. from Jan I keep investing in some good ETFs, avg. you can get atlist 10% ROI in year, withdraw it and pay extra EMIs so that's how I can minimize the tenure of Loan. also in advance, I do positional Option selling and manage to get 5% Monthly since last 3 yrs.

[@joy52905]

Loan emi are on reducing balance, while investment would be on compounding balance. Thus, is always better to both knock off the loan and invest an amount- the proportion would largely depend on how you plan them.

[@sirishakuchibhotla]

exactly hat i wanted.. searching last 6 months..thanku appreciate ur lear explanation

[@atharvasingh1314]

One more perspective - If you invest the amount for 10yrs you will have corpus that in extreme emergency can be used as well, which you don't have if you would have used for prepayment of home loan and you will be forced to take gold/personal loan etc. And if that extreme emergency dosen't happen then you can use your corpus to prepay the loan in one go (like 20yrs loan could be prepayed after 15yrs), considering 12% return and LTCG you will still have money to spare after prepaying the loan.

[@pm_ind5572]

Thanks for valuable guidance.

[@PharmGrow]

Very perfectly done. Thanks mam

[@santoshkumarkar39]

IIFL gold loan vs SBI Gold loan... How to invest, where to invest... Else...

[@arundas-ir2kc]

I was just thinking about these topic.. Thanks for providing making this one..

[@raunaksurana8144]

Superb analysis

[@CARachanaRanade]

Thank you 😊

[@aniketpagar2229]

Thanks for the clear explanation

[@A4ADVENTUR3]

I am in mid 20s and your videos really cleared my options towards my future investments. Thank you for effort for delivering this quality content to all peoples, Can't get this quality of advice from any other place.

[@kintsugii4321]

Awesome as always👍

[@CARachanaRanade]

Thank you 😊

[@vigneshthinakaran8688]

Rachana mam, can you please explain to us about Form 15G, 15H .. If getting divident more than 5K should I need to apply anything. ?

[@petpuran_8076]

Hello Ma'am, In option 2, following assumptions are made which may not be true over period of 15 years of time. 1. Assumption is investment in index fund 2. Rate of return on investment is 14% throughout 15 years. Also following is not considered in calculations in option 1. Persons investment after loan payout within 5_8 years also increases..that profit is missing in gain calculation in option 1

[@gyaancounter3122]

Very useful and informative 👍 👌 👏 video .

[@CARachanaRanade]

Glad you liked it.

[@ManandMachhine]

This is the best video on youtube. Only missing thing madam is age factor pl consider that and let us know age 30, 40,45,50. Also gome loan give 89c benefit which u missed.

[@munjaalraval]

Thank you. Helpful.

[@RX-Ani]

Loans, debt free means peace of mind... ❤

[@saurabhtripathi62]

Really nice video that made a lot of sense, thinking the same having u confirm it makes it a peaceful path :)

[@CARachanaRanade]

Glad you think so!

[@ramamurthysadanandnayak243]

very helpful information 👌

[@rinki5066]

I needed it at this point of time. Thanks for making this video. Bless you

[@saurabhpatil4436]

Increase in the intrest rate will lead to increase in time period for the repayment of loan.. and further those calculation are not considered in option2..

[@manojsudhagar4640]

Very good analysis :) Thanks a ton Mam :)

[@aakudev]

I did the course, i am now making 98% returns.

[@manjupriyalnaidu5522]

Very well explained mam.. I'm learning now to be financially independent.. these information helps me a lot..

[@ramyasri6093]

Excellent video madam..and it's always better to clear off credit card, personal loans

[@olingperme9661]

Superb presentation. 👌

[@CARachanaRanade]

Thank you so much for your Support!

[@AnkitVerma-nf3wv]

1. FD returns post taxes will be close to 4% 2. If NBFC is charging high interest then loan transfer or negotiating for lower interest rate are also some options

[@salirohan]

👌 छान समजावून सांगितले

[@manikandanm6901]

Fantastic explanation!!

[@CARachanaRanade]

Thank you 😊

[@wilsonjubin35]

I was just looking for what to do with my home loan as the interest rates have hiked. And I saw your video got uploaded just that moment. My home loan is only aged 1 year. So I'm going to knock off as much of it as I can right now. Will reanalyze once 5 years are up or half of the principal amount is repayed, whichever comes first.

[@amolsg7]

@jubin: why u came to this conclusion...option 2 is also better option. .trying to understand if u got any other idea or understanding

[@wilsonjubin35]

@@amolsg7 My loan is actually a mortgage loan at floating interest rate, which is at 10.2% interest as of now. Even a 12% return in mutual funds is just a minimal gain compared to that interest rate. Hence I'm choosing to go for prepayment until half of my principal is paid (which I plan to do in the next 3 years). Post that, even the 10.2 interest would be less than the principal deduction of my monthly emi, at which point I can use my excess income for long term goals. That's my chain of thought. Also seeing my debt go down faster helps me sleep better.

[@drsonalisahu]

Actually, being a CA, She should have also shown LTCG tax to be paid for 15 yrs investment and then shown the NET gain. she showed the tax saved with home loan interest though.

[@mohitpatel2220]

Great! Power of mathematics

[@erhari30]

Convincing thought .....nicely explained.....you mesmerize everyone thro finlogic....great madam keep it up. Post more such interesting videos

[@CARachanaRanade]

Thank you 😊

[@RandomHindu]

Simply knock of loan what ever it is ❤

[@deveshrishivankar1249]

Hi rachana... Sagal dokyavrun gelay..... Will I get excel sheets, for my calculation

[@lifeisbeautiful7824]

The last sentence is important.

[@kamalsairam3704]

If Equity and mutual funds yields better returns than loan closure, why do banks into loan business. They can directly invest in them. Subject to market risk😂

[@ManandMachhine]

Also i understand that home cannot be faster liquidity so i prefer investment give faster liquidity

[@keshavsriramsingh]

Very informative video 👌🏻👌🏻. Please do more and more:)

[@Trilok22]

Brilliant video 👌 explaining how to choose wisely and make money by paying loan EMIs instead of loan clearance for that amount 👍

[@anilsalunkhe33]

Very well explained, need to make same vedio on Marathi channel in Marathi language for our people's, it is very beneficial marathi people

[@CARachanaRanade]

Shall try

[@caitools4865]

What if market behaves sideways for next 10 years and index funds won’t give much returns. Why don’t u add another option to counter this to check regularly if one is making more profit in reality and adjust whether to use the funds for loan principal repayment or still keep investing. That will make this video fool proof ❤

[@sagarmalik1290]

Wonderful ❣️

[@anandp1989]

Your video intro's are full of humour... and good content.

[@riteshvishawkarma1748]

Thank you so much mam I am your big fan🙏

[@nitinjoshi2427]

Debt is debt … home loan at 9% is effectively 10% plus return even in stock market. 9% you have to pay surely, but 10% is nor certain

[@santoshkumarkar39]

Very very very... Excellent...

[@CARachanaRanade]

Thank you 😊

[@kishorekb30]

Whether the TAX benefit is calculated only for 1 year ? i.e. 2 lakhs on interest, i assume tax of 2 lakh savings should be taken in account for the entire tenure.... let me know if am i missing something here

[@arshadazam6563]

Thanks 👍

[@ravilepcha6241]

Thank you so much ma'am 🙏

[@CARachanaRanade]

Most welcome 😊

[@kunalmody6601]

More confusing. 10% Of Yearly EMI have to prepay after 5-7 year's of your housing loan. Afterwards we can invest in dynamic bond's instead of nifty ETF.

[@AnupamPatrapatanupam4]

To pay the additional 9 Lacs there's gonna be more interest paid on that too. The Option 2 would then decrease further.

[@naresh040]

Fundamental flaw is 14% interest.. it’s gamble rate .. try to see reducing by 1% nd then will see the game..

[@rajanghadi1982]

Already done absolutely same calculation and not prepaying loan but investing that money in pure equity for 17 years.

[@anupamjana6456]

Looking forward for more such bifurcated videos , layman’s point of view , thanks 😊

[@satyagopalnethi]

always option2. you'll get benefits of additional returns for that 5yrs too. dont forget considering taxation of any gains from investments

[@girishs6668]

1. You assumed tax benefit on entire amount but forgot that limit is 2 lakhs 2 14% roi on equity index really? Just because index had 12% roi for last 15 years there is no gurantee the growth rate would be even better. I would suggest 10%-12% max should be optismitic as you should he little conservative on these calculations. And yes 10% vs 12% vs 14% matters a lot in long run. Also the cheapest home loans are currenty above 8% and might be even more for people with not so great credit score so assuming 7.5% was a mistake in current scenario. Please stop misguiding! After 15 years India would be matured market don't advise 14% CAGR!!!!

[@CommerceBackbenchers]

Gajab…👌👌👌

[@dnandan23]

As per my opinion.. If u have money repay the loan. If u repay loan than interest will be less. Market is not certain anytime. If there is low loan we can plan for another home loan for new investments

[@nikhilgupta091]

In case of home loan also consider the tax benefit you get on interest payment. So if two people have taken the loan and availing 4Lc of tax exemption. This could save upto 1.2Lc per annum (30% tax bracket)

[@mnefne]

In fd you can compound your money, then repaying home loan. Please check.

[@gopalkirde6200]

मॅडम तुमचे video's हे खूपच अभ्यासपूर्ण माहिती देत असतात..... आपण आज ज्या विषय बाबत बोलत हा मराठी मध्ये लवकर द्या.