Let’s assume you take a home loan of ₹70 lakhs with the following terms:
- Tenure: 20 years
- Interest Rate: 8.5% per annum
- Monthly EMI: ₹60,750
Over the full loan term, here’s how much you end up paying:
- Total Interest Paid: ₹75.8 lakhs
- Total Principal Repaid: ₹70 lakhs
- Total Amount Repaid: ₹145.8 lakhs (or ₹1.46 crore)
That’s more than double the original loan amount. However, by combining this repayment with a disciplined investment strategy, you can offset this cost significantly—or even completely.
Here’s how a simple SIP (Systematic Investment Plan) can help:
Scenario 1: Make Your Interest Free
- SIP Investment: 11% of your EMI = ₹6,682/month
- Tenure: 20 years (same as the loan)
- Expected CAGR: 13% (achievable through equity mutual funds)
- Resulting Corpus: Approximately ₹76 lakhs
This means your interest payment of ₹75.8 lakhs is completely covered by your investment. Effectively, the loan becomes interest-free.
Scenario 2: Make Both Principal and Interest Free
- SIP Investment: 22% of EMI = ₹13,365/month
- Tenure: 20 years
- Expected CAGR: 13%
- Resulting Corpus: Approximately ₹1.53 crore
With this strategy, you not only cover the entire interest, but also the principal, making your entire loan repayment free through investment returns.
Scenario 3: Make the Loan Free and Build Additional Wealth
- SIP Investment: 25–30% of EMI = ₹15,188 to ₹18,225/month
- Tenure: 20 years
- Expected CAGR: 13%
- Resulting Corpus: Approximately ₹2.09 crore
In this case, you cover the full loan repayment of ₹1.46 crore and still end up with around ₹63 lakhs of additional wealth. This is ideal for those who want to not just neutralize the loan but also grow their net worth.
Quick Summary –
11% of EMI as SIP – interest becomes free
22% of EMI as SIP – interest + principal becomes free
25-30% of EMI as SIP – interest + principal free + good gains
Final Thoughts
Rather than just focusing on repaying your loan, consider combining it with a long-term SIP strategy. By investing smartly and consistently for the same duration as your loan, you can offset the financial burden and even create significant wealth.
Disclaimer:
Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully. This post is for educational purposes only. Please consult a financial advisor for guidance tailored to your risk profile and goals.
