Are you confused whether to fund an asset such as a car or house with your investments or to take a loan? There are a host of factors to consider when deciding between the two. Your age, financial goals, nature of investments, interest rate, and EMI serviceability are some of the things addressed in this article. It also brings focus on a few simulated scenarios to make the dilemma relatable and help you with your decision-making.
It’s a dilemma that everyone faces at some point or the other. Imagine you wish to buy a big fancy car that you have always wanted. You have invested in a fixed deposit or mutual fund. Should you break the fixed deposit or exit the mutual fund and use that cash to buy the car of your dreams? Or should you opt for a loan and pay an EMI? You could extend this analogy to a home, a dream wedding, or a world tour. The dilemma remains.
The short answer is that you should take up a cost-benefit analysis and pick the option that helps you manage your personal financial situation better. Making an informed choice will benefit you in the long run. To start with, here are some questions you should consider before applying for a loan:
1. Will the loan have an impact on your income in the future?...