Enter your loan details, the extra money you can spare and the return you expect. This loan vs invest calculator compares both paths over the same period and shows which one leaves you with more money.
Loan vs Invest Calculator
Prepay the loan with your surplus, or keep paying the EMI and invest the surplus.
Side-by-side comparison
| At the end of the tenure | Prepay the loan | Invest the surplus |
|---|
Illustrative estimates. Investment returns are not guaranteed, while the interest you save by prepaying is certain.
You have ₹10,000 spare every month and a home loan costing 9%. Prepaying feels safe, investing feels smart, and both feel right. A loan vs invest calculator settles it with numbers instead of mood.
How do you use this loan vs invest calculator?
- Enter the outstanding balance on your loan, not the amount you first borrowed.
- Add the loan’s interest rate and the years left on it.
- Enter the extra amount you can set aside every month.
- Add a one-time lump sum if you have one, such as a bonus or maturity amount.
- Enter the return you expect from investing, after tax and fund charges. Pick a number you can defend.
- Press Calculate, read the verdict and the break-even return, then use Copy result to save a summary.
Stock Charcha built this tool to compare both paths over the same period, because comparing a loan closed early with an investment that is still running is not a fair fight.
How does the loan vs invest calculator compare the two options?
Both paths run for your remaining loan tenure. In the first, your extra money goes to the loan while the EMI stays the same, so the loan ends early and you then invest the full EMI plus extra. In the second, you pay the EMI on schedule and invest the extra every month.
EMI = P × r × (1 + r)n ÷ ((1 + r)n − 1)
Here P is the balance, r is the monthly rate and n is the months left. When the tenure ends the loan is gone in both cases, so the larger investment corpus is the better outcome.
What does a worked example look like?
Take a ₹30,00,000 balance at 9% with 15 years left, ₹10,000 extra a month and a 10% return. These figures are illustrative.
| At the end of 15 years | Prepay the loan | Invest the surplus |
|---|---|---|
| Loan closes in | 9 years 1 months | 15 years |
| Total loan interest | ₹13,99,690 | ₹24,77,040 |
| Investment corpus | ₹39,06,118 | ₹41,44,703 |
At a 10% return, investing wins by ₹2,38,585. That is because 10% sits above the break-even of 9.0%, so the market has to keep delivering for this to hold. The EMI in this example is ₹30,428 a month. Prepaying closes the loan in 9 years 1 months and saves about ₹10,77,350 in interest, yet the investing path still ends ahead because its money stays invested longer.
What return makes the loan vs invest calculator favour investing?
Prepaying a 9% loan is a certain saving, while a 10% investment return is only a hope. Here is how the same example changes with the return you assume.
| Assumed return | Better option | Advantage at the end |
|---|---|---|
| 6% | Prepay the loan | ₹5,37,463 |
| 8% | Prepay the loan | ₹2,06,377 |
| 10% | Invest the surplus | ₹2,38,585 |
| 12% | Invest the surplus | ₹8,30,420 |
The break-even return is 9.0%, which matches the loan rate. Below it prepaying wins, above it investing wins, and the gap stays small near that line. Equity returns also swing from year to year, so the safer choice is the one you can stick with.
Does a lump sum change the answer?
It can. Try the same loan with a ₹5,00,000 lump sum, no monthly extra and a 10% return. The loan vs invest calculator shows that Investing wins by ₹2,64,328 over 15 years, with the same break-even of 9.0%. A lump sum has more time to compound, so test it separately from your monthly surplus. Stock Charcha suggests treating the lump sum and the monthly extra as two separate decisions.
What does this loan vs invest calculator leave out?
It ignores tax. A home loan can carry an interest deduction under the old tax regime, and investment gains attract capital gains tax, so check current rules on the Income Tax Department website as of today. Entering a lower effective loan rate is one way to approximate the deduction.
It also assumes a fixed loan rate and a steady return. RBI’s directions bar prepayment charges on floating-rate loans to individuals for non-business purposes, but fixed-rate loans may still charge them, so read your sanction letter and the RBI rules. Investments are subject to market risks, and an emergency fund should come before either choice. At Stock Charcha we would rather you check the tax angle than trust a clean-looking number.
Where should you go after using the loan vs invest calculator?
If investing wins for you, start by learning what is SIP in mutual funds, then compare SIP vs lump sum. Plan the monthly surplus itself with our 50/30/20 budget guide.
Before you commit money, skim the top investing mistakes to avoid. Then rerun the loan vs invest calculator with a conservative return and see whether your answer holds.
Founder of Stock Charcha. Stock market enthusiast, actively investing since November 2022. About the author
Educational content only. This comparison is illustrative, not personalised financial advice. Please do your own research or speak to a SEBI-registered adviser before choosing, and read our disclaimer.
Frequently asked questions
Is it better to prepay a home loan or invest in mutual funds?
It depends on the numbers and on your comfort with risk. Prepaying gives a certain saving equal to your loan rate, while mutual fund returns vary. Run both paths in the loan vs invest calculator before deciding.
Should I clear a personal loan before investing?
Usually yes. Personal loans and credit card dues often cost far more than investments can reliably earn, so clearing them first tends to win. Check with your actual rate, because the answer flips only when the loan is cheap.
Does the calculator include the tax benefit on home loan interest?
No. A deduction may lower your effective loan cost under the old tax regime, subject to limits. To approximate it, enter a slightly lower loan rate, and confirm the current rules with the Income Tax Department.
What return should I enter for the investment?
Enter a return after tax and fund charges, not the headline figure. Many planners use 10% to 12% for long-term equity, and a lower number such as 8% to 10% is a safer way to plan.
Can I prepay a little and invest the rest?
Yes, and many people do. The calculator compares the two extremes, so try a smaller extra amount for each path. A split also gives you some certain interest savings and some market exposure.