Wondering how to save money after closing a loan? Well, there are a number of ways to save the extra money — the loan EMI amount. Instead of spending this extra money on invaluable items, the best thing to do is invest it. Best part? This will also help you build a better financial future.

From purchasing another home to investing in mutual funds, stocks, and fixed deposits, here are multiple ways to use that money you’ve just freed up:

Keep Funds For Emergency Situations

Emergency situations don’t wait for us to save money. It can occur at any time. Therefore, it is time to use your additional funds to top up your contingency corpus. Or, if you currently have one, attempt to make it bigger, particularly if your income is irregular.

This works best for people with irregular income, such as freelancers. Ideally, it should cover six to 12 months’ worth of monthly costs.

Invest In Fixed, Recurring Deposits

Fixed deposits and recurring deposits work as a secure way to increase your funds. They give guaranteed returns, which makes it an attractive option for people who want to invest and grow their funds gradually. In FDs, the interest rate is added annually, while in RDs, the interest rate is added on a quarterly basis.

Invest In Mutual Funds, Stocks

You can put your excess money in mutual funds and stocks. This additional money can be used to build your bank balance and help in investment. Mutual funds provide professional management and growth, while stocks allow you to profit directly from market expansion.

Make investments with the freed-up money to help you achieve your long-term financial objectives rather than letting it sit about doing nothing.

Retirement Plans

You can use the extra money for insurance investments like LIC, Tata AIA, and HDFC Life. You just have to save your excess monthly savings for an annual premium for five to seven years.

Once the policy matures, you can start receiving regular monthly payouts, which can become your steady income. Later, you may even receive a lump-sum amount so that you may sit back and relax during your retirement.

Paying off a loan is a major financial milestone but with that, you need to make plans to invest that extra money in things that can build long-term wealth and financial stability. It is crucial to plan how you will use the extra money. Instead of just letting it lie around unused or spending it on invaluable things, make sure to use it wisely.

. Read more on Personal Finance by NDTV Profit.Paying off a loan is a major financial milestone but with that, you need to make plans to invest that extra money in things that can build long-term wealth and financial stability.  Read MorePersonal Finance 

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