🔍
Loan Prepayment vs Investment in Mutual Funds & Stock Market - Loan PrePay करें या Invest करें? - YouTube
Channel: Asset Yogi
[1]
Hello my name is Mukul
[3]
and welcome to Asset Yogi
[5]
Friends, we often have to take a loan to meet our needs.
[9]
For example, if we go to buy a house, sometimes its cost is high.
[13]
So for that, we have to take a home loan.
[15]
A vehicle is also a necessity.
[17]
For that, we may have to take a car loan.
[19]
If we have to fill any personal requirement then we have to take a loan for that.
[23]
For education, you have to take an education loan.
[26]
whatever we need, And whatever our salary allow us
[31]
And whatever our budget is, accordingly,
we take loans and keep paying EMI.
[35]
As time passes, our salary also increases.
[39]
So from that our extra cash is generated.
[41]
Sometimes the annual bonus is received,
We get accumulated cash.
[44]
When the businessman receives the lump sum payment, then also we get accumulated cash.
[49]
So when we receive accumulated cash, it brings a dilemma as well.
[53]
And this question is often asked by our subscribers as well.
[56]
wiht this lump sum money
[59]
should I prepay my loan?
[62]
Or better than this, does any investment give more returns than the interest of the loan?
[69]
So should I invest that money there
[70]
For example, If your interest in the loan is more than 9-10% then
[74]
So instead of that if you invest money in mutual fund investments
[77]
So there we get returns of 13-14%,
[80]
Often we also talk about this in our videos,
[82]
So that's not a good alternative?
[84]
This question is very logical
[86]
But at the same time, another question arises here.
[89]
Why doesn't everyone do it if it's such a good business proposition?
[92]
If the bank lend your money at 10%, then
[95]
the bank also have advantage of getting new assets
[97]
For that, they will give you a loan.
And you earn a margin of 4%.
[102]
So what are we missing here?
[104]
If we prepay the loan then what are the benefits we can avail of there.
[108]
How much can we save on the interest?
[110]
And on the other hand, if we invest money in mutual funds or any other way of investment
[114]
so how much profit can we make there
[116]
And on which condition it is right to pay the loan
[119]
And in which condition it is right to put money in an investment
[122]
That's what we are going to know in this video
[124]
Stay tuned to this video till the end.
[126]
press the bell icon while subscribing
[128]
So that you will get notification of the latest finance videos
[131]
Friends, if you want to know more concepts of finance and investment,
[134]
then you can check out our playlist.
[137]
For example, we have Master Investor Series for Stocks
[139]
We also have mutual fund series, real estate series.
[142]
And you will get all this free in our YouTube playlist.
[145]
Let us quickly start our video
[148]
If we want to compare loans and investments,
[151]
then we first look at the options
What options do we have on both sides?
[154]
First, let's talk about loans.
[156]
The lowest interest rate loan is a home loan
we all know this
[160]
Let us assume on average that the home loan interest rate is 8%
[165]
Although today it is also available at 7-7.5%,
it used to be 10%-11% in earlier times.
[171]
We are taking an 8% average just for today's calculation.
[175]
People say that we also get tax benefits,
[177]
Definitely you are right
[179]
Here the tax-adjusted interest rate is 7%.
[184]
I won't go into more detail,
I don't want to make this video a tax video.
[188]
There we get a rebate under section 24 and section 80C.
[192]
We will take a rate of 7% only for the calculation, without going into more details.
[198]
On the other hand, for car loans let say we will take an interest rate of 9% on average.
[202]
In general, a car loan is only 1-2% higher than a home loan.
[205]
So we take an average of 9%
[207]
We get an education loan on average around 10%.
[210]
Let's assume 10% on average.
[213]
Then the personal loan, since it is an unsecured loan,
[216]
So its interest rate is also high.
Although it used to be 17- 18% earlier.
[220]
But now we will take the average because the interest rate has decreased now.
[223]
Let's take on average 14%
[225]
Then the most expensive loan is a credit card loan.
[228]
If you pay the EMI of the credit card, you will notice the interest rates are very high.
[234]
Or you have defaulted any credit card payment
So it levied a very high-interest rate.
[238]
Its levied range is 30%,36%,40%
[241]
So these were all loan options.
[244]
On the other hand, we also have the option of investments.
[246]
Here too we start with the lowest.
[248]
Where do we get the lowest interest rate
[250]
Let's take FD,
remove savings bank account completely
[254]
The interest rate in FD is risk-free.
Let's say today it is around 5 -6%.
[259]
Let's take its average 6%
[261]
But this tax is levied on the FD.
If you fall in the 30% bracket,
[265]
then you will be taxed higher.
I will take the average here as well.
[268]
Instead of 6%, we are getting a 5% average interest rate.
[271]
That means we are getting 5% returns
Post-tax returns
[275]
Similarly in the insurance, you will not get returns of more than 5% to 6%
[278]
So here also let's take on average 5% for FD and insurance
[282]
Post-tax returns are 5%
[283]
After this, we have fixed income options, where we also get tax benefits
[288]
That means no tax is levied under section 80 C
I am talking about 1.5 lakh options.
[293]
Like PPF, EPF
[295]
Sukanya samriddhi Yojana, NPS, etc
[298]
So today let's say we are getting a 7% interest rate.
[302]
So here we will take 7% returns,
and post-tax returns will be 7% as well
[307]
Because no taxes will be levied here
[308]
The next option we have is real estate.
[310]
What are the returns in real estate?
[312]
Here we take let say rental healed i.e. rental return of 3%
[317]
That is, rental returns, although it is 2-3%,
still, on the higher side, we take 3
[321]
Here we are talking about residential real state
or lets take Capital Residential too as a example
[326]
However, there has been no significant profit in the last 7-8 years.
[328]
But still, we take on average that 5% capital appreciation is ensuing.
[333]
So the total we are getting 8% returns.
[336]
But here capital gains tax is levied on capital appreciation.
[338]
So even there we have to cut a little bit, so instead of 8%
we take post tax return of 7%
[345]
The next option we have is gold.
[347]
In gold, we get 8% to 10% returns annually
[350]
Let's take its average 9%
[352]
Here also capital gain tax is levied at 20%.
[356]
So here on average let's take post-tax returns of 7%
[359]
Then we have the option of Mutual Funds and Stocks.
[362]
Here we get returns of 13 to 14%
Before-tax
[365]
But here also, the long-term gains tax is 10%.
[369]
So that one lakh of your profits in a year
[372]
10% of tax is levied on the profit above 1 lac
[376]
Then there also we will reduce that
[378]
Let's say we will assume 12% instead of 13%
[381]
So we have the loan of minimum interest rate is the home loan
[385]
Here We are paying only 7%
[387]
We should not consider the investments below than that
[392]
That means FD, insurance, real estate, PPF, EPF, Kanya Samriddhi Yojana, gold
[397]
These investments are already out of question, we should not even consider them
[401]
We have to invest in a loan with our eyes closed and we shouldn't consider other investments
[406]
Now we will talk about our loans, which loans have more interest
[411]
If you haven't made the payment of credit card
[414]
And 36% is charged from you
[416]
Then you cannot earn this much returns in any investment
[419]
You cannot earn this much in stocks and mutual funds also
[421]
So you have to invest there definitely
[422]
If you are paying 14 to 15% interest in a personal loan
[426]
Then you have to invest there
[428]
Because you are not getting more interest in stocks and mutual funds
[431]
Now the remaining loan is a car loan and home loan
[435]
These are secured loans, interest is less here
[438]
We can do their comparison with mutual funds and stocks
[441]
As we have talks in the introduction that what is missing here
[445]
The thing that is missing here is volatility risk
[448]
Volatility risk means that stocks and mutual funds go up and down, their price keep fluctuating
[454]
This means it can also happen in mutual funds and stocks that your returns may go negative
[461]
This means you can also incur a loss in the short term
[463]
How do we have to make decisions here
[465]
See, when the market is on boom especially the stock market
[469]
Mutual funds are also dependent on the stock market
[472]
Then the stock gets very expensive there
[474]
In times like these, you just have to pay off your loan with your eyes closed
[479]
Because when the market is on the boom, then the chances of getting very good returns in the stock market decreases
[484]
But sometimes the opportunity comes when the market falls
[489]
Like in March and April, markets went down
[492]
In these times, you can invest your money in the stock market or mutual funds
[496]
But yes you have to do an analysis.
[499]
When you get good opportunities, then you can invest money in mutual funds instead of a loan
[505]
But even there you must maintain your liquidity.
[510]
So let's say if you get money.
[512]
Let's say You got five lakh rupees.
[514]
Maintaining liquidity is very important for you.
[516]
Because when the market falls, then at such times an emergency can also come.
[521]
Your job may be at risk or there may be some risk in the business.
[524]
So in such a situation, what you have to do is
[526]
With the cash you have got, you should save some money in your emergency fund.
[531]
First of all, make your emergency fund for 6 to 7 months.
[534]
You keep that money either in the form of cash or keep it in your bank account.
[538]
Or make a short term FD.
[539]
After that, you can invest some money in mutual funds.
[542]
Where you also get liquidity in the long-term.
[545]
Because you can sell
[547]
You can sell it at a profit when the market grows.
[551]
So you will have liquidity.
[553]
After that, you can also repay the loan with the remaining money.
[557]
So basically in a time where you are getting the opportunity
[561]
So even there you can divide your cash.
[563]
Between these three.
[564]
I hope you must have got some solution after watching this video.
[568]
if we have some extra cash.
[570]
So we should give it in loan or invest it.
[572]
Maybe this dilemma is with your friend or someone in the family.
[576]
So please like and share this video,
[578]
If you have some suggestions related to this channel or related to the video.
[581]
You can let us know in the comment section below.
[583]
And also do share your experience in the comment section below.
[586]
If you haven't subscribed to this channel yet, then subscribe now from below
[588]
and press the bell icon on your phone.
[591]
So that you will get notification of the latest video.
[593]
See you in the next informative video.
[595]
Till then keep learning and keep earning.
[597]
and be happy as always
Most Recent Videos:
You can go back to the homepage right here: Homepage