All You Need to Know about Interest-Free Loan: CA Sakchi Jain's Tips

Are you planning to take a home on EMI? If yes, then you will have to pay a heavy interest cost. Is there a way to reduce the interest burden associated with home loans? Yes, you can make that interest-free by just following CA Sakchi Jain's guidance on home loan interest. According to her, you can make your home interest-free by just starting a small monthly SIP (Systematic Investment plan). With this, you can easily recover the entire amount of your interest returns that you get by investing in a SIP over the period.

What is SIP? 

SIP is a method of investing a fixed amount, regularly- monthly or quarterly in a mutual fund scheme. An investor can invest a predetermined fixed amount in a chosen scheme every month or quarter. 

Suppose you have taken a home loan of rupees 10 lakhs at a 9% rate over 20 years. With a monthly EMI of rupees 9,000. After 20 years your interest amount will be 11,60,000 rupees. Now, take a moment to think about it- you pay more than what you borrowed as interest plus the actual amount. Let's understand it with an example.

Home Loan of INR 10 lakh With 9% Interest for a Tenure of 20 Years:

• Home Loan Amount- 10 lakhs
• Tenure- 20 years
• Rate of Interest- 9%
• Interest Payable- 11,60,000/- 
• EMI Per Month- 9,000/-
• Total Payable (Interest+Principal)- 21,60,000/-

So, if you keep paying monthly EMI for 20 years, you end up paying rupees 21.60 lakhs in total. And rupees 11,60 lakhs extra is the interest you pay. 

However, there is no way out to get rid of interest because that's the way the loan system works. Here, Sakchi Jain introduces a different path- one that involves a strategic investment through SIPs. According to her, if you start a monthly SIP Of 1,000 (0.1% of the loan amount), your investment at a 15% average annual return will grow to a total of 12.75 lakh in 20 years. Which exceeds the total interest payable on your home loan.

• Home Loan Amount- 10 lakhs
• Tenure - 20 years
• Interest Amount 11,60,000/-
• SIP Amount Per Month (0.1%)- 1000/- 
• Total SIP Return- 12,75,000/- 

To calculate your estimated returns on investment then you can use tools like SIP calculator to decide the amount of SIP you want to invest.

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As per Sakchi, if you're unsure about receiving a 15% interest rate, consider increasing your monthly SIP from 1000 to 1400. Even if you anticipate a lower rate of 13% your returns will still exceed the interest of your home loan. With the right approach and financial discipline, you can turn your home ownership dreams into reality while maximizing your financial index for long-term success.