Opportunity Cost

If you have excess money in your hands and you are confused whether you should invest it to earn a good return or for prepaying the next EMI, then ‘interest rate’ earned on investment or of loan should be your basis of judgment for priority. For example if an investment yields a return of 15-20 percent annually and your home loan interest rate is 13 percent, then it’s better to opt for investment.

Penalty for Defaulting EMI

If you are juggling over several loans and fail to pay their EMIs on time then it’s better to inform your bank immediately about your financial situation.

When you have the money for paying back then prioritize loan payment not on the basis of their interest rates but according to the penalty involved for evading these loans. For instance, if you have defaulted over both housing and car loan then make sure that you first clear away your car loan. If not you will have to bear the pain of both, losing your credit scores as well as the fright of your car getting impounded by your lender.