How to make your home loan interest-free?
You can make your home loan interest-free by starting a disciplined SIP investment of around 0.15% of your loan amount in index funds. Over time, this investment can grow and completely offset the interest paid to the bank—sometimes even generating a profit.
Introduction: The True Cost of a Home Loan
Buying a home is one of the most important financial decisions for most people. For many, this dream is made possible through a home loan. While EMIs (Equated Monthly Installments) may seem manageable, the real cost of a home loan is often overlooked—the interest. Over a span of 15–20 years, you could end up paying nearly double the original cost of your home due to interest charges.
But what if you could cancel out this interest or even turn it into a financial gain?
Neha Nagar, a finance influencer, entrepreneur, and Forbes India Top 100 Digital Star (2022), offers a powerful strategy to make your home loan interest-free using a simple investment plan. Let’s break down her advice into actionable steps.
The Hidden Cost of Home Loans
At first glance, a home loan looks simple—you borrow money, repay it in EMIs, and eventually own the house. But the interest is where most people lose out financially.
Real-Life Example:
- Home Price: ₹50 lakh
- Down Payment: ₹10 lakh
- Loan Taken: ₹40 lakh
- Interest Rate: 8.5%
- Loan Tenure: 20 years
- Monthly EMI: ₹34,700
- Total Interest Paid: ₹43.31 lakh
So, you’re paying ₹93.31 lakh for a house worth ₹50 lakh. That’s nearly double the cost!
“You’re not just buying the house for yourself—you’re buying it for the bank too,” says Neha Nagar.
Strategy: How to Offset Your Loan Interest with SIPs
Instead of only focusing on EMIs, Neha Nagar recommends starting a Systematic Investment Plan (SIP) alongside your loan repayment.
What is the SIP strategy?
Invest 0.15% of your loan amount (in this case, ₹6,000/month) in index mutual funds.
How it adds up:
- Monthly SIP: ₹6,000
- Total Years: 20
- Total Investment: ₹14.4 lakh
- Average Return (12% p.a.): ₹79 lakh
Turn Your Loan Into Profit
Let’s do the math:
- Investment Returns: ₹79 lakh
- Principal Invested: ₹14 lakh
- Net Profit from SIP: ₹65 lakh
- Interest Paid on Loan: ₹43 lakh
- Remaining Profit: ₹22 lakh
That’s right—by the end of 20 years, your investments not only cancel out the interest, but you could walk away with an extra ₹22 lakh in hand!
Why This Strategy Works
1. Power of Compounding
Even small monthly investments can grow exponentially when invested early and consistently over a long term.
2. Time is Your Ally
The longer your investment duration, the higher your returns due to the compounding effect.
3. Stress-Free Financial Life
Knowing that your SIP is silently working in the background to erase your home loan interest gives you mental peace and confidence.
Let’s Compare: Traditional Loan Repayment vs. SIP-Backed Strategy
| Feature | Traditional Method | SIP-Backed Strategy |
|---|---|---|
| Focus | Only on EMIs | EMIs + Investments |
| End Result | House + Interest Paid | House + Interest Recovered + Profit |
| Mental Stress | High | Low |
| Long-term Wealth Creation | None | Yes |
Implementation Tips
1. Start Early
The sooner you begin, the better your corpus. Even a 2–3 year delay can significantly reduce the returns.
2. Choose the Right Index Funds
Go for low-cost index mutual funds with long-term growth potential like Nifty 50 or Sensex-based funds.
3. Automate Your SIP
Link your SIP to your salary account to avoid missing investments.
4. Stay Consistent
Don’t stop investing even if markets go down. SIP works best when you invest during both highs and lows.
5. Don’t Touch the Corpus Midway
Let the investment grow uninterrupted for 20 years to maximize returns.
What Neha Nagar Says
“Most people just focus on clearing their home loan, but smart investors think ahead. With the right investment approach, you can make your home loan work for you instead of against you,” says Neha Nagar.
Real Estate + Investment = A Powerful Combo
With rising real estate prices and increasing interest burdens, this strategy offers a way to not just manage your home loan but leverage it to create wealth.
You don’t need to be a finance expert—just disciplined, consistent, and informed.