Debt-to-Freedom Wedge
The Debt-to-Freedom wedge answers the most common financial question for India's homeowners: should I prepay my home loan or keep investing?
What you get
Debt-free date: The exact month and year when all your debts (home loan, car loan, personal loan, credit card) will be paid off at current EMI rates.
Prepay vs Invest verdict: For any lump sum you're considering prepaying, the engine computes whether you'd be better off prepaying the loan or investing that amount.
Priority payoff plan: If you have multiple debts, the engine ranks them using a combination of avalanche (highest interest rate first) and snowball (smallest balance first) strategies, with a configurable mix.
AI Debt Coach: After the computation, the AI reads your debt profile and generates a step-by-step action plan, including specific actions for this month, this quarter, and this year.
The prepay vs invest calculation
For a given lump sum L:
Prepay outcome:
- Reduces principal by
L - Saves interest equal to
L × effective_loan_rate × remaining_years(simplified; the engine uses full amortisation)
Invest outcome:
- Invests
Lat your expected portfolio returnrfornyears
The verdict is: invest if expected_investment_return > effective_loan_rate.
The complication: Home loan interest in India is at ~8.5–9% nominal. Post-tax (if you're still eligible for Section 24 deduction), the effective rate drops to ~6–7%. If your portfolio returns 12%, investing wins — but only if you're actually disciplined enough to invest the lump sum rather than spend it.
The engine accounts for the tax deduction status of your loan when computing the effective rate.
The effective prepay rate concept
The platform computes an "effective prepay rate" that goes beyond just the interest rate. It accounts for:
- Remaining loan tenure (longer tenure = more interest saved from prepayment)
- Tax treatment of the loan interest
- Prepayment penalty (if applicable)
This effective rate is what you compare against your portfolio's expected return.
When to always prepay
- Personal loans and credit card debt above 15% APR — always prepay first
- Car loans above 12% — usually prepay first
- Home loans: depends on your effective rate, tax status, and portfolio discipline
The AI coach outputs a priority list based on your actual EMI data.