Prepay the home loan, or buy bonds and corporate FDs?

A few days ago, I wrote about why it is better to close a #HomeLoan early, rather than parking surplus money in #equities.
That post sparked another debate with a friend, “Why not invest in #Bonds or Corporate #FixedDeposits instead? They give 10–12% returns, far better than home loan rates!” One of the latest financial products being promoted by #Finfluencers!

Here’s how the conversation unfolded 👇
He: Why not bonds? They are A+ rated and even have collateral!
Me: Do you realize ratings can change overnight? An A+ today can turn into Junk tomorrow. Even collateral doesn’t guarantee recovery. Remember the 2008 #subprime crisis?

He: Aren't you being too conservative with your advice!
Me: Not conservative, just realistic. With something as essential as a home, why take unnecessary risks? I don’t want to lose my roof because a bond issuer collapsed.

He: Any real examples?
Me: Plenty!
- #YesBank AT1 Bonds (2020): ₹8,400+ crore wiped out when bonds were written off.
- #FranklinTempleton Debt Schemes (2020): ₹26,000 crore locked up when 6 schemes shut down.
- #ILFS (2018): Rated AAA before default, triggering a crisis across NBFCs.
- #FutureGroup (aka #BigBazaar) FDs & #TruCap (recent): Investors' money got stuck, repayments delayed/defaulted.
Even #SEBI data shows that recovery rates in Indian corporate bond defaults are often below 25%, meaning investors do lose money quite often! Unlike Bank FDs (insured up to ₹5 lakh under #DICGC), there’s no #RBI safety net here. The risk lies entirely with the investor.

To poke him further, I asked -
If banks give personal loans at ~10%, why would an institution offer you 12% on deposits?
This clearly implies the borrower’s creditworthiness is weaker → higher risk → higher reward (if at all).
Sadly, most retail investors only look at #returns and ignore #risks. That’s where the danger lies.

When it comes to essentials like housing, I’d rather be boringly safe than heroically sorry!

Have you invested in any of the corporate bonds? Have you ever faced liquidity issues, delayed payments? Do share your experience!

And if in case you are looking for any help on #CreditCards optimization, #PersonalFinance, #taxation, feel free to reach out to me!

#Money

Earlier Post - https://lnkd.in/gnGxWitZ