Diwali Bonus: Should You Prepay Your Home Loan Or Invest In Mutual Funds?

Agarwal says the difference between the two options becomes clearer over longer periods, but investors should also keep the risks in mind. “Over 15 years, Rs 1 lakh in an equity fund could grow to roughly Rs 3.9-5.1 lakh after tax at assumed returns of 10-12 per cent a year, against an effective Rs 3.4 lakh from prepaying. Over five years, though, the difference is small, and a single bad year can wipe it out,” he says.