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Ramalingam Kalirajan8626 Answers |Ask - Follow
Mutual Funds, Financial Planning Expert - Answered on May 15, 2025
Asked on - May 06, 2025
Sir, I have loan liabilities of 17.36 Lakhs ( 2.32 Lakhs personal Loan and 15.04 Lakhs Jewel mortgage loan) and having the cash reserve of 12 Lakhs which i am using for trading in stock market. What will be the best option for me whether to close the loan with reserved cash or continuing with trading to get the profit which is used to pay the interest charges of loan amount.
Ans: Managing loans while investing or trading requires careful evaluation.
Understanding Your Current Situation
You have total loans of Rs. 17.36 lakhs: Rs. 2.32 lakhs personal loan, Rs. 15.04 lakhs jewel mortgage loan.
You have Rs. 12 lakhs cash reserve invested in stock market trading.
Your trading profits are used to pay loan interest charges.
Your question: whether to use cash to close loans or continue trading to cover interest.
Both choices have pros and cons. Let’s analyse carefully.
Loan Interest and Impact on Finances
Personal loans usually have high interest rates, often 12%-18% per annum.
Jewel mortgage loans have comparatively lower interest, but still costly.
Interest costs reduce your disposable income monthly.
High interest drains your financial power over time.
Reducing or clearing high-interest loans improves cash flow.
Loan principal repayment reduces interest outgo in future.
Evaluating Using Cash to Close Loans
Using Rs. 12 lakhs cash to partly or fully repay loans cuts interest burden.
Personal loan of Rs. 2.32 lakhs can be fully closed immediately.
Rs. 9.68 lakhs can be used to reduce jewel loan principal.
Lower loans mean lower monthly interest payments.
Improves your financial stability and reduces stress.
You lose the cash reserve invested in trading.
No guarantee stock market trading profits will exceed loan interest.
Trading is risky; market may turn against you anytime.
Using cash to pay loans is a safe, risk-free return equal to interest saved.
Evaluating Continuing Trading to Pay Interest
Trading profits are uncertain and risky.
You may earn higher returns than loan interest sometimes.
But losses can increase your burden.
Emotional stress increases when market moves against you.
Trading requires active time, skill, and discipline.
You risk losing capital which is needed to pay loan interest.
Interest on loans continues to accumulate if you don’t reduce principal.
Other Important Points to Consider
Emergency fund: After loan repayment, maintain 3-6 months expenses as cash reserve.
Trading capital: You need some capital for trading but not at the cost of high interest loans.
Loan prepayment penalties: Check if any charges apply.
Alternative income: Can you generate stable income apart from trading?
Risk tolerance: Are you comfortable risking your cash for trading profits?
Psychological impact: High debt plus trading risk can cause stress.
Recommended Approach
First, repay personal loan fully from cash reserve.
Use remaining cash to reduce jewel mortgage loan principal.
This lowers your interest burden significantly.
Keep at least 3 months of living expenses as emergency fund.
Continue trading with smaller capital only if comfortable and disciplined.
Avoid using emergency or loan repayment money for trading.
Focus on stable, low-risk investment avenues for surplus cash.
Once loans reduce, your financial position strengthens.
You can invest more consistently without high interest dragging you down.
Final Insights
Clearing high-interest personal loan first is a priority.
Reducing jewel loan principal lowers interest cost and stress.
Trading profits are uncertain and cannot replace guaranteed loan savings.
Using cash to reduce debt is safer than hoping for market profits.
Maintain emergency fund for financial stability.
Trade only with surplus money after debt control.
This balanced approach strengthens your financial future.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
(more)
Understanding Your Current Situation
You have total loans of Rs. 17.36 lakhs: Rs. 2.32 lakhs personal loan, Rs. 15.04 lakhs jewel mortgage loan.
You have Rs. 12 lakhs cash reserve invested in stock market trading.
Your trading profits are used to pay loan interest charges.
Your question: whether to use cash to close loans or continue trading to cover interest.
Both choices have pros and cons. Let’s analyse carefully.
Loan Interest and Impact on Finances
Personal loans usually have high interest rates, often 12%-18% per annum.
Jewel mortgage loans have comparatively lower interest, but still costly.
Interest costs reduce your disposable income monthly.
High interest drains your financial power over time.
Reducing or clearing high-interest loans improves cash flow.
Loan principal repayment reduces interest outgo in future.
Evaluating Using Cash to Close Loans
Using Rs. 12 lakhs cash to partly or fully repay loans cuts interest burden.
Personal loan of Rs. 2.32 lakhs can be fully closed immediately.
Rs. 9.68 lakhs can be used to reduce jewel loan principal.
Lower loans mean lower monthly interest payments.
Improves your financial stability and reduces stress.
You lose the cash reserve invested in trading.
No guarantee stock market trading profits will exceed loan interest.
Trading is risky; market may turn against you anytime.
Using cash to pay loans is a safe, risk-free return equal to interest saved.
Evaluating Continuing Trading to Pay Interest
Trading profits are uncertain and risky.
You may earn higher returns than loan interest sometimes.
But losses can increase your burden.
Emotional stress increases when market moves against you.
Trading requires active time, skill, and discipline.
You risk losing capital which is needed to pay loan interest.
Interest on loans continues to accumulate if you don’t reduce principal.
Other Important Points to Consider
Emergency fund: After loan repayment, maintain 3-6 months expenses as cash reserve.
Trading capital: You need some capital for trading but not at the cost of high interest loans.
Loan prepayment penalties: Check if any charges apply.
Alternative income: Can you generate stable income apart from trading?
Risk tolerance: Are you comfortable risking your cash for trading profits?
Psychological impact: High debt plus trading risk can cause stress.
Recommended Approach
First, repay personal loan fully from cash reserve.
Use remaining cash to reduce jewel mortgage loan principal.
This lowers your interest burden significantly.
Keep at least 3 months of living expenses as emergency fund.
Continue trading with smaller capital only if comfortable and disciplined.
Avoid using emergency or loan repayment money for trading.
Focus on stable, low-risk investment avenues for surplus cash.
Once loans reduce, your financial position strengthens.
You can invest more consistently without high interest dragging you down.
Final Insights
Clearing high-interest personal loan first is a priority.
Reducing jewel loan principal lowers interest cost and stress.
Trading profits are uncertain and cannot replace guaranteed loan savings.
Using cash to reduce debt is safer than hoping for market profits.
Maintain emergency fund for financial stability.
Trade only with surplus money after debt control.
This balanced approach strengthens your financial future.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment