Prepay home loan or invest – the typical dilemma

Prepay home loan or invest? I was asked this query recently in webinars. With interest rates tapering off, I have seen discussions on financial forums on smart leverage. 
“Why prepay home loan now? It is so cheap. Instead, invest in options which give you more than 7% p.a. Have a business mindset. You can invest in equities for over 10 years, likely to yield double-digit returns. Then you prepay home loan & avail tax benefits too. Do these calculations on Excel.”
But alas! Life is not a spreadsheet; not always rosy. It is brutally unpredictable as seen now in Covid times. Leverage is good when you want to satisfy basic need like a home loan or further income potential like a business loan. But leverage is also a double-edged sword which can catch you off guard. Do not compare 1-yr FD rate with 20-25 yr home loan floating rate. Do not compare your home loan rate with 10-yr equity returns. That is even dumber. Avoid the silly math. Even if you can afford EMIs, they can be a burden when adverse times strike. Choose peace of mind. Debt affects your life not just financially but also psychologically. Turning debt free gives you a liberating & confident feeling about your future & you are better prepared to face any financial calamity. It is a significant life choice.

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