Which is better if you get a lump-sum amount, pre-paying a loan or investing?

Choosing whether investing is better or pre-paying a loan using a lump-sum amount depends on multiple factors. Pre-paying is better in a loan's first few years, when EMIs' interest portion is substantial. In later years, investing is better. Borrowers must try not to use their emergency fund for pre-payment and compare pre-payment benefits with actual investment returns, not estimated returns.