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₹20,000 extra every month: Why paying off your personal loan first may win over an SIP
Mint 1 hr ago·11 Sept 2026, 3:17 pm
A recent report highlights a common financial dilemma: what to do with a monthly windfall, such as a salary hike. The choice is between investing the extra amount in a Systematic Investment Plan (SIP) or using it to pay off a personal loan. The analysis suggests that prioritizing loan repayment can be more beneficial than investing the full amount, depending on the interest rates involved.
For retail investors, this strategy matters because personal loans typically carry higher interest rates compared to the potential returns from equity mutual funds. By using the extra income to clear debt, an investor effectively saves the difference between the loan's interest rate and the mutual fund's expected return. This approach can help build a larger investment corpus over time by reducing the interest burden and allowing for more efficient wealth creation.
Excerpt from Mint
With a ₹ 20,000 monthly raise, borrowers must choose between repaying a personal loan or investing in mutual funds. Clearing a high-interest loan first can save more in interest and result in a larger investment corpus compared to investing the entire amount monthly. Got a pay raise? Have extra ₹ 20,000 every month?…Read the original at Mint
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