Should I take a loan or use my FD for my son's education?

Sir for my son's education is it better to take loan or use my fd , i fall in 30 %IT slab. Pls adv

Ans: You are in the 30% tax slab. The choice between taking a loan or using your fixed deposit depends on multiple factors. Let’s evaluate both options from a financial and strategic perspective.

Benefits of Taking an Education Loan
Tax Benefits on Interest Paid

The interest paid on an education loan qualifies for a tax deduction under Section 80E. This benefit is available for up to eight years.

Since you fall in the 30% tax slab, this deduction can help reduce your taxable income.

Liquidity Retention

Keeping your fixed deposit intact ensures liquidity for emergencies and other financial goals.

Unexpected medical expenses or job loss can impact cash flow. A loan helps you maintain financial security.

Low-Interest Rates Compared to Other Loans

Education loans usually have lower interest rates than personal loans. Some banks also provide a moratorium period, during which repayment starts after course completion.

Credit Score Improvement

Timely repayment of the loan will improve your credit score. This can help in the future if you need to take another loan.

Disadvantages of Taking an Education Loan
Interest Outflow

Even though the tax benefit reduces the burden, you will still pay more than the actual loan amount due to interest.

If you can afford the expenses without affecting other goals, avoiding interest payments is better.

Loan Repayment Burden

If your son does not secure a high-paying job immediately, the repayment can become stressful.

You may have to step in to make EMI payments, affecting your retirement plans.

Benefits of Using Fixed Deposits
No Interest Outflow

By using your own funds, you avoid paying interest to the bank. The actual cost of education remains lower.

Peace of Mind

Without a loan, you won’t have to worry about monthly EMI payments. This ensures financial stability and mental peace.

Better Financial Freedom for Your Son

If you fund the education yourself, your son starts his career debt-free. This gives him more flexibility in career choices.

Disadvantages of Using Fixed Deposits
Loss of Liquidity

Using the fixed deposit will reduce your emergency funds. If another major expense arises, you may struggle to arrange funds quickly.

Impact on Other Financial Goals

If this fixed deposit was set aside for another financial goal, using it for education may delay that goal.

You need to evaluate whether this will affect your retirement or home purchase plans.

Tax on Fixed Deposit Interest

The interest earned on fixed deposits is fully taxable as per your slab. Since you are in the 30% slab, this reduces your net return.

Key Factors to Consider Before Deciding
Cash Flow Stability

If your monthly income and investments provide enough financial security, paying from the fixed deposit is a good option.

If not, an education loan can help manage cash flow better.

Alternative Investment Options

If your fixed deposit is earning lower returns than the loan interest rate, it makes sense to use it instead of taking a loan.

If your investments are growing at a higher rate than the loan interest, taking a loan is financially better.

Risk Tolerance

If you are comfortable managing debt and can benefit from the tax deduction, a loan can be a strategic decision.

If you prefer a risk-free approach, using your fixed deposit is the better choice.

Optimal Approach for You
Since you are in the 30% tax slab, an education loan can provide tax benefits.

However, if your fixed deposit is earning a lower return than the loan interest, using it can be financially smarter.

If liquidity is not a concern and your retirement plans remain unaffected, funding education yourself is a good choice.

A balanced approach is also possible. You can take a partial loan and use some of your fixed deposit. This way, you reduce the loan burden while keeping some liquidity.

Finally
Taking an education loan has tax benefits and keeps liquidity intact. However, it comes with interest costs and repayment obligations.

Using your fixed deposit saves interest but reduces liquidity and may impact other financial goals.

The decision depends on your financial stability, investment returns, and long-term goals.

A Certified Financial Planner can help structure your finances in the most tax-efficient way.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: You have done very well. Starting with a small loan and building assets of crores is not easy. You have cared for your family, built savings, and kept your lifestyle under control. You have also kept insurance in place, which is very wise. Your focus now is children’s education and retirement. Both are achievable with a proper plan.

» Current Financial Snapshot
– Age: 46, wife 40, two sons aged 17 and 13.
– Assets: Rs. 1 crore in FD, one flat worth Rs. 75 lakh, two plots worth Rs. 4 crore and Rs. 80 lakh, Rs. 25 lakh in PPF, LIC of Rs. 30 lakh, Sovereign Gold Bonds Rs. 12 lakh.
– Income: Rs. 60,000 monthly from FD, Rs. 20,000 monthly rent, Rs. 60,000 to 90,000 business income.
– Expenses: Rs. 1.1 lakh monthly including school fees.
– Surplus: Around Rs. 50,000 monthly.
– Insurance: Family health cover Rs. 25 lakh (planned to increase to Rs. 50 lakh), LIC policies, no loans.

This shows a very strong and stable financial base.

» Children’s Education Goal
Your elder son needs Rs. 1 to 1.5 lakh monthly for 4 years from next year. Younger son will need the same after 4 years for 5 years. That means for around 9 years, you will need heavy cash flow for education. You want to sell the Rs. 80 lakh plot to manage this. This is a reasonable idea. Education is a priority. Funding it from a separate lump sum makes sense.

» Use of Rs. 80 Lakh Plot Sale
If you sell this plot, you can park the amount safely. Do not keep all in FD with monthly payout. Instead, stagger the money. Keep the first 2 to 3 years expenses in FD for liquidity. Keep the balance in safe debt options with gradual redemption. This way you earn better growth than normal FD. You will have predictable flow for both children’s studies. Selling this plot for education is a practical decision.

» Retirement Corpus Planning
Your retirement expenses will be around Rs. 1 to 1.5 lakh per month after children settle. You already have Rs. 1 crore in FD, Rs. 25 lakh in PPF, Rs. 12 lakh in gold, and rental income of Rs. 20,000. LIC maturity of Rs. 30 lakh will also add. In addition, you have a Rs. 4 crore plot. When you sell this in future, you expect Rs. 5 to 6 crore. This can give either large FD interest or rental from commercial property. That is the main driver for your retirement.

» FD and Interest Dependency
You like FD as your safe choice. FD gives fixed return and regular income. But it has two issues. First, interest is fully taxable. Second, it may not beat inflation over 20 to 30 years. You may feel comfortable today, but value of money reduces over time. With Rs. 1.5 lakh monthly need, you must ensure FD corpus is very large to support rising costs. Keep this in mind.

» Role of Gold and PPF
Gold is a hedge. You already have Rs. 12 lakh in Sovereign Gold Bonds. That is fine. Do not increase more. PPF of Rs. 25 lakh is safe and tax free. It adds to your retirement pool. Continue extension till 15 years if possible. It is a stable support.

» LIC Policies
Your LIC maturity of Rs. 30 lakh is not very large compared to your total wealth. LIC policies give safety but lower growth. After maturity, do not reinvest again in LIC. Shift the maturity proceeds to better instruments like FD or safe debt for income flow.

» Business Income Consideration
Your business is giving Rs. 60,000 to 90,000 monthly now. But you already sense pressure from recession. Do not depend on this as permanent. You must plan retirement income without including business income. If business gives profit, it will be extra cushion.

» Real Estate Considerations
You plan to sell the Rs. 4 crore plot later when it touches Rs. 5 to 6 crore. You also plan to buy a commercial property for rental of Rs. 2.5 lakh monthly. You must be cautious here. Real estate deals involve risks like tenant issues, delay in renting, maintenance, and liquidity. FD with 6 to 7% interest is safe but taxable. Rental income is also taxable and not always guaranteed. You should not depend only on this. Diversify your wealth so that you have multiple income sources, not just rent or FD.

» Health Insurance
You have Rs. 25 lakh cover, planning to increase to Rs. 50 lakh at 50 years. That is very important. Healthcare costs rise very fast. This step will protect your retirement corpus.

» Estate Planning
You live in ancestral home. You must write a Will clearly mentioning asset distribution. Mention how property and money should be divided between wife and sons. Do nomination in bank FDs, PPF, LIC, and bonds. This avoids future legal issues.

» Safe vs Growth Balance
You dislike equity and mutual funds. You want safety. But understand one point. FD interest may look enough today, but after 15 to 20 years, inflation will eat into your money. Rs. 1 lakh today may need Rs. 2 to 3 lakh then. FD will not grow to match this. Equity can beat inflation, but you are not comfortable. In such case, at least keep small exposure to growth-oriented safe funds managed by professionals. Otherwise, your wealth may look big but will reduce in value later.

» How to Manage Education and Retirement Together
– Sell Rs. 80 lakh plot. Park money in FD and safe debt for children’s fees.
– Keep Rs. 1 crore FD as retirement corpus. Do not touch it for education.
– LIC maturity of Rs. 30 lakh after 5 years can add to retirement fund.
– Continue PPF extension and treat it as retirement income booster.
– Sovereign Gold Bonds of Rs. 12 lakh can be kept till maturity for safety and small income.
– When sons complete studies, you will still have Rs. 4 crore plot to sell. That will be the main funding for higher retirement lifestyle.

» Risks to Watch
– Depending only on FD and real estate can reduce long-term growth.
– Tax on FD interest will reduce real income.
– Rental income may not always be steady.
– Inflation risk is real. Expenses may double in 10 to 12 years.
– Health costs may eat corpus if insurance is not high enough.

» Better Balance Suggestions
– Do not put all proceeds from Rs. 4 crore plot into commercial property. Diversify. Keep some in FD for sure. But also look at professional management funds through CFP. Active funds give better inflation protection. Avoid index funds as they only copy markets without risk control. Avoid direct funds as they need constant monitoring. Regular funds through CFP give discipline and review.
– Keep your emergency fund separate, at least Rs. 10 to 15 lakh in liquid form.
– Increase health cover to Rs. 50 lakh soon, not later.

» Finally
You have done great work till now. Your savings habit and asset creation are solid. Your plan to sell Rs. 80 lakh plot for children’s education is correct. For retirement, do not depend only on FD and rental. They are safe, but inflation and tax will hit. Use diversification for part of wealth. Keep core in FD if you like safety, but let a share grow in actively managed funds with CFP guidance. Write a Will and update nominations. Keep health cover high. With this balanced approach, you can educate both sons fully, retire peacefully, and live with dignity without fear of running out of money.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

Ans: You already built a solid foundation. Many investors delay planning. But you started early at 36. That gives you a strong advantage. You have no liabilities. You have long term thinking. You also have diversified savings like PPF, NPS, Emergency funds and direct stocks. That shows clarity and discipline. This approach builds wealth with less stress over time.

You also started systematic investments in equity funds. That is a positive step. Your selection covers multiple categories like large cap, mid cap, small cap, flexi cap, hybrid and precious metals. So the intent is right. You are trying to create a broad portfolio. That gives balance.

» Your Portfolio Composition Understanding
Your current SIP list includes:

Small cap

Mid cap

Flexi cap

Large cap

Large and mid cap

Hybrid category

Gold and Silver FoF

Equity and Debt allocation fund

Dynamic hybrid fund

This shows you are trying to cover many segments. But too many categories can create overlap. When there is overlap, you get confusion during review. It also makes portfolio discipline difficult. You may think you are diversified. But the holdings inside may repeat. That reduces efficiency.

Your portfolio now looks like:

Equity dominant

Hybrid for stability

Metals for hedge

So the broad direction is fine. But simplifying helps in long-term habit building.

» Fund Category Duplication
You hold:

Two flexi cap funds

One large and mid cap fund

One pure large cap fund

One mid cap fund

One small cap fund

Flexi cap funds already invest across large, mid, small. Then large and mid also overlaps. So the large cap exposure gets repeated. That may not add extra benefit. But it increases monitoring complexity.

So I suggest rationalising. Keep one fund per category in core. Keep satellite space for only high conviction.

» Core and Satellite Strategy
A structured portfolio follows core and satellite method.

Core portfolio should be:

Simple

Long term

Stable

Satellite portfolio can be:

High growth

Concentrated

Based on your thinking level, you can structure like this:

Core funds:

One large cap

One flexi cap

One hybrid equity and debt fund

One balanced advantage type fund

Satellite funds:

One mid cap

One small cap

One metal allocation if needed

This division gives clarity. You can continue SIPs with review every year. No need to stop and restart often. That reduces behavioural mistakes.

» Your Current SIP List Review with Suggested Streamlining

You can consider continuing:

One flexi cap

One large cap

One mid cap

One small cap

One balanced advantage

One equity and debt hybrid

You may reconsider keeping both flexi caps and both gold silver funds. One of each category is enough. Because too many funds do not increase returns. It complicates tracking.

Precious metal funds should not be more than 5 to 7 percent in your portfolio. This is because metals are hedge assets. They do not create compounding like equity. They act as protection during cycles. So keep them small.

» How to Use the Rs 6 Lakh Lump Sum
You asked about lump sum investing. This is important. Lump sum should not go fully into equity at one time. Markets move in cycles. So use a staggered method. You can invest the lump sum through STP (Systematic Transfer Plan). You can keep the amount in a liquid fund and set STP toward your chosen growth funds over 6 to 12 months.

This reduces timing risk. It also creates discipline. So your Rs 6 lakh can be deployed gradually. You may use 50% towards core equity funds and 30% toward satellite growth category. The remaining 20% can go into hybrid category. This gives balance and comfort.

» Regular Funds Over Direct Funds
One important point many investors miss. Direct funds look cheaper. But they demand deep knowledge, discipline, and behaviour control. Most investors lose more through emotional selling and wrong timing than they save on expense ratio.

With regular funds through a Mutual Fund Distributor with Certified Financial Planner qualification, you get guidance, structure and correction. The advisory discipline protects you during market extremes. That is more valuable than a small saving in expense ratio.

A personalised planner also tracks portfolio drift, rebalancing need and category shifts. So regular fund investing gives long-term benefit and behaviour coaching.

» Actively Managed Funds over Index or ETF
Some investors choose index funds or ETF thinking they are simple and cheap. But they ignore drawbacks.

Index funds or ETF will not avoid weak companies in the index. They will invest whether the company grows or struggles. There is no fund manager decision making. So when markets are at peak, index funds continue aggressive exposure. In downturns also they fall fully. There is no cushion.

Actively managed funds work with research teams. They can avoid bad sectors. They can shift allocation based on market and economy. Over long term, this gives better alpha and stability. So continuing with actively managed funds creates better wealth compounding.

» SIP Continuation Strategy
Once the rationalisation is done, continue SIPs every month without interruption. Pause and restart behaviour damages compounding power. SIP works best when you go through all market cycles. You benefit more during corrections because cost averaging works.

So continue SIP amount. You can also review SIP increase every year based on income. Increasing SIP by 10 to 15 percent every year helps you reach large corpus faster.

» Asset Allocation Based Approach
One key point in wealth creation is having the right asset mix. Equity gives growth. Hybrid gives balance. Metals give hedge. Debt gives safety. Your asset allocation should stay aligned to your risk profile and time horizon.

Since you are young and have long term horizon, higher equity allocation is fine. But as time moves, rebalancing is important. Rebalancing protects gains and restores allocation.

So review your asset allocation every year or during major life events like child birth, home buying or retirement planning.

» Behaviour Management
Many portfolios fail not due to bad funds. They fail due to bad decisions. Selling during correction. Stopping SIP when market falls. Chasing past return performance. These mistakes reduce wealth.

Your discipline so far is good. Continue to stay patient during volatility. Equity rewards patience and time.

» Financial Goals Clarity
Since you have no children now, you can decide your long-term goals. Typical goals may include:

Retirement

Future child education

Dream lifestyle purchase

Health care reserves

When goals are clear, investment purpose becomes stronger. So you can map each fund category to goal horizon. Short-term goals should not use equity. Long-term goals should use equity with hybrid support.

» Role of Review and Monitoring
Review once in a year is enough. Frequent review can create anxiety. Annual review helps check:

Fund performance

Expense drift

Category relevance

Allocation balance

Then adjust only if needed. This progress helps you stay confident and aligned.

» Taxation Awareness
Equity mutual funds taxation rules are:

Short term (below one year holding) taxable at 20 percent

Long term (above one year holding) gains above Rs 1.25 lakh taxable at 12.5 percent

Debt mutual funds are taxed as per your income slab.

So always hold equity funds for long term. That reduces tax impact and gives better growth.

» SIP Increase Plan
You can create a simple plan to increase SIP over time. For example:

Increase SIP at every salary increment

Increase SIP during bonus time

Use rewards or extra income for investing

This habit accelerates wealth. So by the time you reach 45 to 50 years, your investments could reach a strong level.

» Insurance and Protection
Before investing large, ensure you have term insurance and health insurance. If not already done, it is important. Insurance protects wealth. Without insurance, even a small medical event can impact investment plan. So review this part also. Since you are married, cover both.

» Wealth Behaviour Mindset
You are already disciplined. Just keep these simple principles:

Invest without stopping

Review once a year

Avoid funds overlap

Follow asset allocation

Avoid reacting to media noise

This helps you reach long term milestones.

» Finally
You are on the right track. Only fine tuning and simplification is needed. Your discipline is visible. Your portfolio will grow well with structure, patience and periodic review. Use the Rs 6 lakh with STP approach. And continue SIP with rationalised categories.

With time and consistency, wealth creation becomes effortless and peaceful. You just need to stay committed and avoid overthinking during market movements.

Best Regards,
K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment