How to make your home loan interest-free

For most people, buying a house with a loan is a lifelong financial commitment. But what if there was a way to make your home loan interest-free—or even turn it into a profit? Finance influencer, entrepreneur, and educator, Neha Nagar has shared a simple yet effective investment strategy that challenges the conventional approach to loan repayment.

Neha Nagar, who helps people understand money investment and financial planning, and was featured in Forbes India's Top 100 Digital Stars list in 2022, says home loans may seem straightforward, but the real cost lies in the interest payments.

Hidden cost of a home loan

Nagar explains the hidden cost of a home loan with a simple calculation.

Home loans may seem straightforward, but the real cost lies in the interest payments. Nagar explains this with a simple calculation:

• Buy a house worth Rs 50 lakh.
• Make a Rs 10 lakh down payment and take a Rs 40 lakh home loan at an 8.5 per cent interest rate for 20 years.
• Monthly EMI comes to Rs 34,700.
• Over 20 years, the total interest paid to the bank will be Rs 43.31 lakh.

This means that instead of paying Rs 50 lakh for the house, she is actually paying Rs 93.31 lakh—nearly double the original cost.

“Most people don’t realize that when they take a loan, they are not just buying a house for themselves, but also for the bank,” says Neha Nagar.


Strategy to offset loan interest
This can be countered by a disciplined investment approach that works alongside loan repayment.

Instead of just paying EMIs, start a Systematic Investment Plan (SIP) to invest 0.15 per cent of the loan amount—or Rs 6,000 per month—in index funds.


Here’s how it works:

• Over 20 years, the total investment in SIPs is Rs 14 lakh.
• Assuming an average annual return of 12 per cent, this investment grows to Rs 79 lakh.

Turning a Loan into a Profit

Now, let’s break down the numbers:

• Rs 79 lakh - Rs 14 lakh (total investment) = Rs 65 lakh
• Rs 65 lakh - Rs 43 lakh (loan interest paid) = Rs 22 lakh profit!

By using the returns from her SIP investment, you can completely offset the interest paid to the bank and still make a significant profit.

Why this strategy works
Neha Nagar emphasizes that the key to making this work is starting early and staying consistent. Home loan interest rates may feel overwhelming, but smart investing can turn the tables.

Instead of simply repaying the loan, this strategy leverages the power of compounding to reduce financial stress and build long-term wealth.

"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 Nagar.

A smarter way to manage loans
With real estate prices rising and interest rates adding a huge financial burden, this strategy presents a compelling case for balancing debt repayment with wealth creation. For those looking to optimize their home loan payments, this approach provides a clear and achievable roadmap.

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