Which is Better? Repaying Debt or Making Investment?

It’s festive season and some of you may receive bonus in addition to their salary! Some people tends to enjoy the festive mood while some aims to make fresh investments expecting huge returns!

But the fact they are missing-out is assessing their current financial position and check if they are holding huge credit card bills, Personal Loan, Vehicle Loan EMI’s etc. They ignore the high interest rates and delay to repay the loans at the moment.

Instead of repaying high cost debts, they tend to invests in risky assets like equity with the bonus amount they received. We are not saying investing in equity is not the right thing to do! Infact it is a wise decision! But interest rates of personal loans, credit card bills are far higher than the unpredictable returns of equity!

We should invest in equity only if you have no debts and remains surplus money. Holding huge debts which carries high interest rates is a risky bet to you and your family! You may assume that your investments will help you in repaying your debts, but due to uncertainity in the equity markets it is not possible always! You should keep this in mind!

Before making investments, confirm that you don’t have any debts and when you are financially free, then only you can take a chance to invest in equity.

The first thing you have to do after receiving bonus is- Clear all your debts and still you have surplus money, then only invest in equity. If you aims to invests, don’t get tempted by short term surprises in the equity market! Some times equity gives booster energy to your savings while some times you may loose your capital! Invest in equity only if you have long term view

Before making investment, you should be financially free with no debts. If you have debts, repay them sooner and once you are free, then only think of investments! Debts carries 12-48%(Subject to debt instrument) while equity gives 12-15% that too in long run.

Holding 24-48% interest rate debt and investing in an instrument which gives 12-15% return is a foolish idea! So from hereonwards, calculate debt interest rates and repay them as early as possible! After repaying debts, think of investments!!

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