Reviewed by Artha Research·Last updated 13 April 2026
Prepay Loan or Invest in SIP?
Should you use your monthly surplus to prepay your home loan or invest in SIP? See which builds more wealth — and which is safer.
Your numbers
Monthly surplus — prepay the loan or invest in SIP?
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SIP wealth gain
₹32.5L
Investing the surplus builds more wealth
SIP gains (₹32.5L) exceed the interest saved by prepaying (₹0.6L).
Invest the surplus — but only if you can stay invested through volatility. Prepaying is the safer choice.
Prepay vs SIP
Invest (SIP)
₹32.5L
WinnerPrepay loan
₹57.4K
Invest (SIP) wins by 5557%.
Risk-adjusted, prepay often wins.
SIP corpus
₹50.5L
SIP wealth gain
₹32.5L
Interest saved by prepay
₹57.4K
Monthly surplus
₹10,000
Prepay is a guaranteed return; SIP is not
Prepaying a 8.5% loan is equivalent to earning 8.5% risk-free. SIP at 12% is an assumption, not a guarantee.
At a glance
- What it compares
- Interest saved by prepaying a loan vs wealth gained by investing the same surplus in SIP.
- Key insight
- Prepaying is a guaranteed, risk-free return equal to your loan rate. SIP returns are uncertain.
- Who should use this
- Anyone with a running home loan and a monthly surplus wondering where to deploy it.
- Verdict logic
- SIP wealth gain vs interest saved by prepayment. Risk-adjusted, prepay often wins.
How It Works
This is the drill-down layer. The flagship flow leads with a recommendation, and this page lets you inspect the underlying model.
- Interest saved = simplified prepayment benefit estimation.
- SIP corpus = FV of monthly SIP.
Assumptions
The recommendation stays blunt, but the assumptions remain visible.
- SIP returns are assumed, not guaranteed.
- Tax benefits on home loan interest (Section 24) not factored.
- Prepay interest savings use a simplified estimation.
FAQ
The follow-up questions people usually ask after the main recommendation is already clear.
What if my loan rate is low (< 8%)?
At low rates, SIP almost always wins because equity returns typically exceed 8%. But prepaying is still guaranteed — SIP returns are not.
Sources & references
Every formula and assumption above is grounded in these authoritative sources.
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