What should be done with proceeds from the sale of normal income security if not replaced?

When proceeds from the sale of normal income security are not replaced, they should be applied as an extra payment. This action helps to reduce the outstanding loan balance more quickly and can potentially lower the interest costs associated with the loan. By utilizing these proceeds effectively, it improves the overall financial health of the borrower and demonstrates a proactive approach to managing debt.

Understanding how this choice operates within the broader financial context reveals that making extra payments on a loan is often encouraged as a strategy for reducing overall liability. It also reflects a responsible financial practice that can enhance the borrower's creditworthiness and financial stability.

Other choices may not align with prudent financial management practices, which is why they are less suitable in this context. For instance, counting the proceeds as regular income might misrepresent the financial situation and could have tax implications. Similarly, not counting them towards loan repayment or applying them as a refund does not maximize the benefit of the sale and could lead to a missed opportunity to improve one’s financial standings.