You probably have heard of the phrase "buy term and invest the rest". It means to buy a term insurance instead of a whole life insurance and use the savings in insurance premiums for investment. Can this advice be applied to loans as well? Meaning, instead of paying off your loan over a short period of time, you stretch your loan over a longer period and use the reduction in loan repayments for investment.

Let us consider the following scenarios:

The loan principal is $400,000. You have a sum of $32,545 yearly which can be used to either service the loan or ...