There is always confusion about whether we should repay the home loan faster or just keep doing only the minimum and invest the remaining in other things. I keep getting this question in my mind, too. The final conclusion I usually reach is to pay back the home loan as soon as possible, and I keep pushing for the extra money whenever it is possible.
One thing that we know for sure is that if we need some cash flow, having a home loan is the best because nobody else gives a loan at 8 percent interest. If we have to get a personal loan, the interest rate is more than 12 percent. So even if we have to invest our money in something, the investment provides 7 percent returns, so the difference is only 1 percent, which is very small. So, considering all these facts, it might look like we have to hold off sending more money to our home loan and complete it, but my thought process is going to be a little contradicting to this.
I think that paying off the loan faster is good. The first main reason is that we cannot be sure how long we can keep working. There is a huge dependency that we have to somehow continue working just to cover the EMI cost. So, coming out of debt is good for people who would like to retire early and be debt-free. The next reason that I see is that if we complete one loan, we can always go for another home loan or another investment. I have seen many people moving from one property to another.
I know a person who bought multiple houses, and the returns he is generating from the home itself take care of the EMI to be paid to the bank. This is a great thing. If we have multiple sources of that passive income, our future can be left safe and we don't have to worry about liquidity in the future.
Another reason why paying off the loan amount is good and being debt-free is that we cannot be sure how long we will be healthy. There can be some unexpected emergency in the family for which we might have to spend the money. If something like that happens, we have to be sure that we have enough funds, and having a huge loan at that time is not a good thing. We might find it hard to manage all the expenses together.
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