Due to the moratorium policy during the Covid period, Instead of reducing my home loan, the loan period has increased due to higher interest payments. I restructured the loan but it was of no use. I had taken a loan of Rs. 12 lakhs for a period of 25 years. Till now, I have paid Rs. 12 lakhs in installments, but the remaining amount is still due. What to do to pay off debt quickly ?
Ans: You are not alone—many borrowers faced similar issues during the moratorium and restructuring period. Let’s now explore this situation in detail with a 360-degree financial approach, in simple words and clear steps.
Understanding Your Current Loan Situation
You took a loan of Rs 12 lakhs.
Tenure was 25 years.
You have already paid Rs 12 lakhs in EMI till now.
Still a big part of the loan is unpaid.
This is mainly due to the moratorium interest piling up.
Restructuring did not help much in reducing the burden.
Reasons for the Outstanding Loan Amount
Moratorium allowed to pause EMIs, but interest kept adding.
That extra interest increased your total loan.
In restructuring, banks only gave lower EMIs or longer tenure.
Your EMIs mostly went to interest, not principal.
This caused very slow principal reduction.
You feel stuck despite paying for many years.
Step-by-Step Action Plan to Pay Off Faster
1. Start Small Prepayments Monthly
Start with Rs 3,000 to Rs 5,000 extra EMI per month.
Even small amounts reduce interest burden.
Give a clear written instruction to the bank:
“Use this prepayment only for principal reduction.”
Do not let the bank reduce EMI or increase tenure again.
2. Use Annual Bonus or Windfalls for Loan
Whenever you get bonus or maturity of FD, use it.
Don’t spend that money. Put directly towards the loan.
One big prepayment in a year helps more than 12 small ones.
Target at least one large prepayment each year.
3. Review Your EMI Amount Now
If your income has increased, increase the EMI.
Even Rs 2,000–Rs 3,000 increase helps long-term.
Many banks allow free EMI hike. Use this option.
Don’t wait till the end of tenure to make changes.
4. Refinance If Rate Is Too High
Check if your loan interest is still 9% or more.
If yes, ask your bank to shift to lowest rate.
If they refuse, consider refinancing to another bank.
Choose a bank with lower interest and no hidden charges.
But calculate cost vs benefit before doing this.
5. Shift SIP Strategy Temporarily
You are investing Rs 50,000 monthly in SIPs.
For 6 to 12 months, divert Rs 10,000 from SIP to loan.
This is temporary but can save lakhs in interest.
Later, restart that Rs 10,000 SIP once loan reduces.
6. Avoid Making Only EMI Payments
EMI is not enough anymore. Prepayment is a must.
EMI = mostly interest, especially in early years.
Prepayment = principal reduction, real progress.
That’s the only way to speed up loan closure.
7. Avoid Reducing EMI When Interest Drops
When RBI cuts rates, bank may offer to reduce EMI.
Instead, keep EMI same and reduce tenure.
Reducing tenure saves much more in interest.
Ask bank in writing to keep EMI fixed, reduce tenure.
8. Don’t Fall for Loan Restructuring Again
Avoid future restructuring offers unless you’re in crisis.
It gives short-term relief but long-term pain.
You already saw this effect once.
Stick to strict repayment with discipline.
9. Stop Unnecessary Expenses
Look at your lifestyle spending.
Cut 10% monthly expenses and direct to loan.
Every Rs 1,000 saved can close the loan earlier.
This needs commitment from all family members.
10. Track Your Loan Progress Every 6 Months
Take a loan statement from bank every 6 months.
Check how much principal is reducing.
This keeps you aware and motivated.
Ask the bank to clarify any confusion.
Emotional & Psychological Preparation
You may feel disheartened after paying Rs 12 lakhs and still owing more.
But don’t lose focus now. You are not alone.
The damage was due to an exceptional pandemic event.
You can still recover from this. But action must be fast.
What You Should Not Do Now
Don’t take another personal loan to prepay.
Don’t invest in risky assets hoping for faster gains.
Don’t stop SIP fully unless in financial emergency.
Don’t buy any insurance-cum-investment products to “save tax.”
Don’t wait for things to get better. Start now.
Suggested Priority Flow of Funds
Emergency savings: 6 months of expenses in liquid fund.
Then, high interest loan prepayment (like this home loan).
After that, resume full SIPs or increase them further.
This flow gives best overall benefit.
Final Insights
Moratorium and restructuring were temporary reliefs, not permanent solutions.
Your situation is difficult, but it’s repairable.
Discipline, small prepayments, and smart money moves will free you sooner.
Target to close the loan in the next 5 to 7 years.
Every year you save in EMI is equal to gaining peace of mind.
Stay consistent. Track your plan every few months.
This loan should not follow you into retirement.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment