While investing in a healthy habit, no one likes to live under debt. With this, the question often arises, whether should some invest when they are in debt. The answer to this is, it entirely depends upon your situation.
Analyze your Debt Situation
It would be best if you analyze your income and debt position. i.e., your monthly outgoing towards servicing your debt and your savings after meeting your monthly expenses and debt servicing. If you have adequate savings after meeting your debt obligations and expenses, you should invest your savings.
Analyze Nature of your Debt
Before investing when you're in debt, it is vital to analyze the nature of your debt. In your debt comprises of high-interest debts such as personal loans and credit card debt, you should divert your savings to reduce this debt instead of investing, and you can opt to invest your savings if your debt comprises of low-interest debt such as home loan, motor vehicle loans, etc.
Tax Deductible Debt
Particular debt, such as home loan, have tax deduction benefits. For instance, you can avail of tax deduction on interest paid on home loans up to Rs. 2 lakhs per annum Under Section 80EE of the Income Tax Act. If your debt is allowing you to avail of tax deduction benefits, you should continue these debts and invest your savings, whereas if your investments do not offer tax deduction benefits, you can select to invest your savings in reducing their debt rather than making an investment.
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