I am 28 years old ,and i have an outstanding personal loan of 13.5 lacs, iam earning 10.3 lacs a year, I have invested in various mfs and my current value of assets are around 18.5 lacs, iam getting good returns on my investments (average rate of...

I am 28 years old ,and i have an outstanding personal loan of 13.5 lacs, iam earning 10.3 lacs a year, I have invested in various mfs and my current value of assets are around 18.5 lacs, iam getting good returns on my investments (average rate of 15%), my question is should I close my loan or continue paying emi of 30k per month? .I have been advised to let my investments grow and keep paying the emis, i might get married within 2 years and was thinking of becoming loan free before getting married.

Ans: It’s great to see that you have managed your investments well and are earning a good return. Your discipline in maintaining a diversified portfolio and consistently paying off your loan is commendable.

Assessing Your Financial Situation
Current Income and Loan Status
You earn Rs. 10.3 lakhs annually and have an outstanding personal loan of Rs. 13.5 lakhs. Your EMI is Rs. 30,000 per month. Your current investments total Rs. 18.5 lakhs with an average return of 15%.

Upcoming Life Events
You are considering getting married within the next two years. Being debt-free before marriage can provide financial stability and peace of mind.

Analyzing Loan Repayment vs. Investment Growth
Investment Returns vs. Loan Interest Rate
Your investments are yielding an average return of 15%. Compare this with the interest rate on your personal loan. If your loan interest rate is lower than your investment returns, it might be beneficial to let your investments grow.

Opportunity Cost
Continuing to invest instead of paying off the loan means your money can potentially grow more. Calculate the opportunity cost of prepaying the loan versus continuing with your investments.

Pros and Cons of Paying Off the Loan
Benefits of Closing the Loan
Debt-Free Status: Being loan-free before marriage provides financial security.
Reduced Monthly Outflow: Eliminating the Rs. 30,000 EMI can free up funds for other uses.
Drawbacks of Closing the Loan
Reduced Investment Growth: Using your investments to pay off the loan may limit your potential investment growth.
Opportunity Cost: You might miss out on higher returns from your current investments.
Pros and Cons of Continuing Loan Repayments
Benefits of Continuing EMIs
Investment Growth: Your investments continue to grow at a higher rate.
Financial Flexibility: Maintaining liquidity can help with future expenses or emergencies.
Drawbacks of Continuing EMIs
Interest Payment: Continued EMIs mean ongoing interest payments, increasing the total cost of the loan.
Financial Burden: The EMI of Rs. 30,000 per month is a significant outflow.
Making an Informed Decision
Evaluate the Interest Rate
Compare your loan’s interest rate with the returns on your investments. If your investment returns significantly exceed the loan interest rate, it might be better to continue investing.

Consider Your Financial Goals
If becoming debt-free before marriage is a priority, paying off the loan might provide peace of mind. Consider the emotional and financial benefits of being debt-free.

Impact on Liquidity
Ensure that paying off the loan doesn’t compromise your liquidity. Maintain an emergency fund to cover unexpected expenses.

Professional Guidance
Certified Financial Planner (CFP)
Consult a Certified Financial Planner to get personalized advice. They can help you weigh the pros and cons based on your specific financial situation.

Conclusion
Balancing your loan repayment with your investment growth requires careful consideration. Compare the interest rates, evaluate your financial goals, and consult a professional if needed. Making an informed decision will help you achieve financial stability and peace of mind.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You have managed your life responsibly at a young age. Owning a home, maintaining mutual fund investments, and providing for your family show discipline and focus. At 35, your income level is strong, and your financial situation can be stabilized with a few practical adjustments. Your concern about managing two loans while raising a child is valid, and it can be addressed systematically.

» Understanding Your Current Financial Situation

Your monthly family income is around Rs 2.4 lakh. Your total EMIs come to Rs 1 lakh, which means almost 42% of your income goes to debt repayment. That is a little high for comfort, especially with a one-year-old child and rising household expenses.

Your home loan balance is Rs 78 lakh with an EMI of Rs 82,000. The personal loan of Rs 8 lakh has an EMI of Rs 18,000. Personal loans generally carry high interest rates, while home loans are lower and offer tax benefits.

You also have mutual funds worth Rs 25 lakh, which gives you good liquidity. You are in a better position than many young families because you have savings available. The challenge is to use them wisely.

» Evaluating Loan Burden and Cash Flow Pressure

The total monthly outflow of Rs 1 lakh on EMIs is heavy for your stage of life. You have a growing child, family expenses, and the need to build future savings. Your wife’s income of Rs 60,000 helps, but you still face pressure on monthly cash flow.

It is important to reduce high-interest debt first. Personal loans typically carry 13%–16% interest. Home loans are around 8%–9%. If you continue both, a large portion of your income will go towards interest for several years.

Hence, tackling the personal loan first will reduce your burden meaningfully. Once that is cleared, your cash flow will improve by Rs 18,000 per month immediately. This can provide breathing space and allow you to manage household needs comfortably.

» Should You Use Mutual Funds to Prepay Personal Loan?

Yes, it is practical and wise to use part of your mutual fund corpus to close your personal loan. The logic is simple. The post-tax return from mutual funds (especially debt or hybrid) is usually lower than the interest you are paying on the personal loan.

For example, if your mutual funds are earning around 9% average annual return, but your personal loan costs 14%, you are losing value. Paying off that personal loan gives you a risk-free and guaranteed return equal to the loan interest you save.

You can use around Rs 8–9 lakh from your Rs 25 lakh mutual fund corpus to close the personal loan fully. Keep the remaining Rs 16–17 lakh invested for your long-term goals and emergencies.

By doing this, you free Rs 18,000 every month immediately. That is like earning an extra Rs 2.16 lakh per year without taking risk.

» Why Not Use Mutual Funds to Prepay Home Loan Now

Do not use mutual funds to prepay the home loan at this stage. Home loans are long-term, lower-cost loans that offer income tax benefits on both interest and principal repayment.

Also, housing loan interest after tax adjustment becomes effectively cheaper, especially if you fall in higher tax bracket. It is better to keep investing in mutual funds rather than repaying a low-interest, long-duration loan early.

If you use mutual funds to close the home loan, you will lose your emergency cushion and the power of compounding. Continue paying the home loan EMIs regularly. Focus on building future savings and liquidity instead.

» Reviewing Mutual Fund Portfolio

Before redeeming Rs 8–9 lakh to clear your personal loan, check your mutual fund portfolio composition. If you have both equity and debt funds, withdraw primarily from the debt or hybrid portions first.

Equity funds have long-term growth potential. It is better to preserve them for future goals like your child’s education or your retirement.

Also, review your overall mutual fund mix with a Certified Financial Planner. Avoid direct funds, even though they look cheaper. Regular funds through a CFP with MFD credential provide professional review, rebalancing, and ongoing guidance. This helps you stay aligned with your goals.

Avoid index funds too, as they only track an index and cannot adjust in market corrections. Actively managed funds with experienced fund managers provide flexibility and better downside protection.

» Setting Up an Emergency Fund

After closing the personal loan, maintain an emergency fund of at least six months of total expenses. This should include EMIs, household costs, and childcare expenses.

You can park this in liquid mutual funds or short-term bank deposits. For your family, this fund should be around Rs 5–6 lakh. This protects you from sudden financial shocks like medical emergencies or temporary job issues.

Do not invest this emergency fund in equity or long-term funds. It should stay fully accessible.

» Managing Monthly Budget and Lifestyle

Your fixed EMI of Rs 1 lakh will reduce to Rs 82,000 after closing the personal loan. With a household income of Rs 2.4 lakh, your EMI-to-income ratio will drop to about 34%. That is comfortable and safe.

Now review your monthly expenses. Create three categories:

Essentials (food, bills, baby needs, EMIs)

Comfort (subscriptions, dining, non-essential items)

Goals (savings, insurance, child education fund)

Allocate at least 10% of your income for savings even after EMIs. Keep growing your mutual fund investments monthly, even if through small SIPs. The consistency matters more than the amount.

» Importance of Insurance Protection

With high responsibilities and a home loan, you must secure your family with proper insurance. Take a term life insurance cover of at least Rs 1.5 crore for yourself. This ensures your wife and child can manage the home loan if anything happens to you.

Also, take family health insurance that covers your wife and baby adequately. Employer insurance may not be enough. A separate personal health plan adds safety.

Do not buy investment-linked insurance like ULIPs or endowment plans. They are expensive and give low returns. Always keep insurance and investment separate.

» Planning Future Goals

After stabilizing your current cash flow, you can refocus on long-term goals. Your child’s education and your retirement will be the next milestones.

You already have mutual funds worth Rs 16–17 lakh after using some for loan repayment. You can start new SIPs with part of your monthly surplus later. Use diversified equity mutual funds for long-term wealth creation.

Avoid overexposure to small or midcap funds. Keep a mix of large-cap and hybrid funds for balanced growth.

Revisit your goals with your Certified Financial Planner once every year. Adjust your asset mix according to your age and income growth.

» Tax Efficiency Planning

Your home loan gives you tax benefits under Section 80C for principal repayment and Section 24(b) for interest up to Rs 2 lakh per year. Continue to claim them fully.

Your mutual funds will give long-term capital gains advantage if held for more than one year. Under new rules, LTCG above Rs 1.25 lakh is taxed at 12.5%. Short-term gains are taxed at 20%.

When redeeming to close your personal loan, check which mutual funds have completed one year to reduce tax impact. Redeem those first to minimize short-term gain taxation.

» Psychological Relief and Family Stability

Debt creates stress, especially when you have a young family. Clearing your personal loan gives immediate emotional relief. That peace of mind is also a financial benefit because it helps you plan calmly for future goals.

Once the personal loan is cleared, focus on family comfort and savings growth. Keep your financial communication open with your spouse. Together, you can handle any temporary financial strain with clarity and confidence.

» Gradual Improvement Plan

After closing the personal loan and setting up your emergency fund, you can slowly increase your monthly SIPs as your salary grows. This ensures your wealth builds steadily even with EMIs.

You can also plan to make partial prepayments on your home loan every two to three years if you receive bonuses or incentives. That will shorten your loan tenure and save interest.

But do not rush to prepay at the cost of losing liquidity. Maintain balance between safety, growth, and debt reduction.

» Managing Lifestyle Inflation

As your income rises, your expenses will also rise naturally. Control lifestyle inflation consciously. Avoid taking new loans for cars, gadgets, or vacations. Prefer saving first, spending later.

If you maintain this discipline for the next five years, your financial independence will grow very fast. Your family will have security, and your child’s future will remain protected.

» Finally

Your decision should be simple: use part of your mutual fund corpus to close the personal loan immediately. Continue paying your home loan normally. Maintain an emergency fund, review insurance coverage, and restart systematic investments once cash flow stabilizes.

This approach will improve your monthly comfort, reduce debt pressure, and strengthen your family’s long-term security. You are already doing many things right; you just need to prioritize debt reduction and liquidity now.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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

Ans: You have explained your income, goals, current assets, and future plans with great clarity. Your early planning spirit is strong. This gives a very good base. You can reach a peaceful retirement with smart steps in the next few years.

» Your Current Position

You are 40 years old. You plan to retire in 3 to 5 years. You earn Rs 2.3 lakh per month. Your wife also works but will stop working soon. You have one daughter aged 10. Your current monthly cost is around Rs 1.1 lakh. This cost will reduce after retirement because you will shift to your parental flat.

Your investment base is already good. You have saved in bonds, stocks, mutual funds, PPF, FD, and SIP. Your wife also has her own savings and rental income from a flat. All these create a good starting point.

This early base helps you plan stronger. It also gives room for more shaping. You are on the right road.

» Your Family Goals

You need Rs 75 lakh for your daughter’s higher education and marriage.

You want Rs 75,000 per month for family living after retirement.

You want to retire in 3 to 5 years.

You will shift to your parental flat after retirement.

You will have rental income of Rs 10,000 from your wife’s flat.

These goals are clear. They give direction. They allow a strong plan.

» Your Present Investments

Your investments include:

Rs 50 lakh in REC bonds maturing in 2029.

Rs 42 lakh in stocks.

Rs 17 lakh in mutual funds.

Rs 16 lakh in fixed deposits.

Rs 15 lakh in PPF.

Rs 1.3 lakh as monthly SIP.

Your wife holds:

Rs 30 lakh corpus.

A flat worth Rs 40 lakh with rent of Rs 10,000 each month.

Your combined net worth is healthy. This gives good power to build your retirement fund in the coming years.

» Understanding Your Expense Need After Retirement

You expect Rs 75,000 per month after retirement. This includes all basic needs. You will not have rent. That reduces cost. This assumption looks fair today.

Your cost will rise with inflation. So you must plan for rising needs. A strong retirement corpus must support rising cost for 40 to 45 years because you are retiring early.

An early retirement needs a large buffer. So you need safety along with growth. Your plan must include growth assets and safety assets.

» How Much Monthly Income You Will Need Later

Rs 75,000 per month is Rs 9 lakh per year. In future years, this cost can rise. If we assume steady rise, your future cost will be much higher.

So the retirement corpus must be designed to:

Give monthly income.

Beat inflation.

Support you for 40 to 45 years.

Protect your family even in market down cycles.

Allow flexibility if your needs change.

A strong retirement fund must support both safety and long-term growth.

» How Much Corpus You Should Target

A safe target is a large and flexible corpus that can support long years without running out of money. For early retirement, the usual thumb rule suggests a very high number. This is because you need income for many decades.

You need a corpus big enough to produce rising income. You also need a cushion for unexpected health costs, lifestyle shocks, and inflation changes.

Your target retirement corpus should be in a strong range. For your needs of Rs 75,000 per month and for goals like daughter’s education and marriage, you should aim for a combined retirement readiness corpus in the higher bracket.

A safe range for your family would be a very large number crossing multiple crores. This large range gives you:

Income safety.

Inflation protection.

Peace during market cycles.

Comfort in long life.

Room for daughter’s future.

Strong backup for health.

You are already on the way due to your existing assets. You will reach close to this range with systematic building over the next 3 to 5 years.

» Why You Need This Larger Corpus

You will retire early. That means more years of living from your corpus. Your corpus must not fall early. It must grow even after retirement. It must give monthly income and long-term family protection.

This is only possible when the corpus is strong and well-structured. A weak corpus creates stress. A strong corpus creates freedom.

Also, your daughter’s future cost must be kept aside. This must be parked in a separate fund. This must not touch your retirement money.

A strong corpus makes these two worlds separate and safe.

» Your Existing Assets and Their Strength

You already have good diversification:

Bonds give safety.

Stocks give growth.

Mutual funds give managed growth.

FD gives stability.

PPF gives tax-free long-term savings.

This blend is already a good start. But you need to make the blend more structured for early retirement.

Your Rs 1.3 lakh monthly SIP is also strong. It builds your future fast. You should continue.

Your wife’s rental income is small but steady. This adds strength.

Your combined financial base can reach your retirement target if you refine your allocation now.

» Your Daughter’s Future Fund Need

You need Rs 75 lakh for your daughter’s education and marriage. You should keep this goal separate from your retirement goal.

Your current SIP and future allocations should create a dedicated fund for this goal. A long-term fund can grow well when managed actively.

Do not mix this fund with your retirement needs. Mixing leads to shortage in old age. Always keep this corpus ring-fenced.

» A Strong Asset Mix For Your Retirement Path

A balanced mix is needed. You need growth assets to beat inflation. You also need stable assets for income.

You must avoid index funds because they do not give flexibility. Index funds follow a fixed index. They cannot make active changes in different markets. They cannot move to better stocks when markets change. They force you to stay in weak sectors for long. They also do not help you in down cycles because they cannot protect you by shifting to safer options. This can hurt retirement planning.

Actively managed funds are better because:

They give active asset selection.

They give scope for better returns.

They give flexibility to change sectors.

They give downside management.

They give access to a skilled fund manager.

They support long-term planning more safely.

Direct plans also carry risk. Direct plans do not give guidance. They do not give behavioural support. They do not give market timing help. They do not give portfolio shaping. They leave all the judgement to you. One mistake can cost years of wealth.

Regular plans with guidance from a Certified Financial Planner help you shape decisions. They help you remain disciplined. They help you avoid panic. They help you decide allocation changes at the right time. This saves wealth in long-term.

» How Your Investment Journey Should Grow in the Next 3–5 Years

Continue your SIP.

Increase SIP when your income rises.

Shift part of your stock holding into planned long-term mutual funds to reduce concentration risk.

Build a defined daughter’s education fund.

Keep a part of your REC bond maturity amount for long-term.

Avoid locking too much into fixed deposits for long periods.

Build a safety fund for one year of expenses.

This will create a full structure.

» Your Rental Income Role

Your rental income of Rs 10,000 per month is small but steady. Over time it will rise. This income will support your monthly cash flow after retirement.

You can use this for utilities or health insurance premiums. This gives a cushion.

» Your Emergency Buffer

You should keep at least one year of essential cost in a safe place. This can be in a liquid account or short-term fund. This protects you in shocks.

Since you plan early retirement, a strong buffer is important. It gives peace even in low months.

» A Structured Retirement Approach

A complete retirement plan for you should include:

A clear monthly income plan after retirement.

A corpus that can grow and protect.

A rising income system that matches inflation.

A separate daughter’s future fund.

A health cover plan for your family.

A tax-efficient withdrawal plan.

A market cycle plan to protect you in tough times.

This holistic approach keeps your family strong for decades.

» What You Should Build by Retirement Year

Your aim should be to reach a strong multi-crore range in investments before retirement. You already hold a large amount. You will add more in the next 3 to 5 years through SIP, stock growth, bond maturity, and disciplined saving.

Once you reach your target range, you can start the shifting process:

Move a part to stable assets.

Keep a part in long-term growth assets.

Create a monthly income strategy.

Keep a reserve bucket.

Keep a child future bucket.

Keep a long-term growth bucket.

This structure protects you in all market conditions.

» Final Insights

Your financial journey is already strong. You have a good income. You have saved well. You have multiple asset types. You have a clear timeline. And you have clear goals. This foundation is solid.

In the next 3 to 5 years, your focus should be on growing your combined corpus to a strong multi-crore range, keeping a separate fund for your daughter, reducing risk in unplanned assets, and building a stable long-term structure.

With the present path and a disciplined structure, you can retire peacefully and support your family with confidence for many decades.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

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