Pay cash or take a loan?
See which leaves you richer.
Buying a car, a bike, a phone or anything else? Compare paying the full price in cash with taking a loan and keeping your cash invested. It works for “no-cost EMI” offers too.
How the difference adds up
Both routes spend the same money: the same amount today and the same amount every month. Only where it goes is different.
What you would have, year by year
Investments after tax, as if sold that year, minus any loan still owed.
Before you decide
- Returns are not guaranteedThe expected return is an assumption. Markets can return less, or lose money, while the EMI stays the same.
- It needs disciplineThe loan route works only if the cash stays invested and every EMI is paid on time. Paying cash works only if you really invest the money you save each month.
- Keep an emergency fundDo not count your emergency savings as the cash you keep invested. Missed EMIs bring penalties and hurt your credit score.
- Peace of mind countsBeing debt-free has a value of its own. A small projected gain may not be worth carrying a loan.
Loan details and repayment schedule
| Year | Owed at start | EMIs paid | Principal | Interest | Owed at end |
|---|
Investments and tax in each route
| At the end | With the loan | Paying cash |
|---|
Year by year
| Year | Loan still owed | With the loan: investments | With the loan: net | Paying cash: investments | Loan route ahead by |
|---|
Investments are shown after tax, as if sold that year. Net = investments minus the loan still owed. A negative “ahead by” means paying cash is ahead.
How this comparison works
A fair, like-for-like comparison
Whatever you buy, you get the same thing either way, so only the money is compared. Both routes use the same money: the full price today, and the EMI amount every month until the loan ends.
- With the loan: you pay the down payment and any fees, keep the rest of the price invested, and pay the EMI every month from your income.
- Paying cash: you pay the full price, and invest the same EMI amount every month instead of paying it to a lender.
The answer is what each route leaves you with when the loan is fully repaid. Simply comparing loan interest with the growth on the cash you keep overstates the loan route, because it forgets that the cash buyer can invest the EMI money too.
Timing and returns
The loan uses a reducing balance: interest each month is the yearly rate ÷ 12 on the amount still owed, and the EMI is paid at the end of the month. Investments grow at the effective monthly equivalent of the yearly return, (1 + yearly)^(1/12) − 1. The cash you keep is invested today; the cash buyer’s monthly amount is invested at the start of each month.
Tax on investment gains (FY 2026–27 rules)
- Equity funds: each month’s investment is aged separately. Gains held more than 12 months are taxed at 12.5% above the unused ₹1,25,000 exemption you enter; gains held 12 months or less at 20%. 4% cess is added. The exemption is used once, when you redeem at the end.
- Debt funds bought now: all gains are taxed at your slab rate, however long you hold them.
- Fixed deposits: interest is taxed every year at your slab rate, so the deposit grows at the after-tax rate.
Surcharge for very high incomes, exit loads and TDS timing are not included. Interest on general loans (car, bike, personal, consumer) gets no tax deduction for individuals, so none is counted. Business use, education loans and home loans have special rules that this tool does not cover.
Who leads
A gap within 0.5% of the larger result (or ₹100, whichever is more) is called too close to call. The break-even return is the yearly return at which both routes end up equal, with everything else unchanged.
An illustration based on the values you enter, not a loan offer, tax advice or a recommendation. Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Your lender’s EMI can differ slightly because of rounding and the disbursement date.