Hi sir. I am 40 years, having a salary of 2.5L take home. I have a personal loan emi 1.1L for next 5 years for 50lacs. I have few insurance, lic yearly 40k and mutual funds monthly 3k. Own flat and a car (no emi). Pf monthly 20k and total in pf account 10lacs. MONTHLY household expenses 75k. Because of which unable to do savings each month.Can you please tel me best way to save money and get tide of hefty personal loan of 50lacs
Ans: Appreciate your openness. Managing such a tight cash flow needs careful planning. You already own a flat and car, which removes rent or EMI stress. That is a big relief. Your discipline with PF and insurance shows commitment. With Rs 2.5 lakh income, a 5-year Rs 50 lakh personal loan is a heavy load. But with the right plan, it can be managed. Let’s explore practical ways to reduce loan burden and increase savings.
? Assess the Real Cash Flow Pressure
Income: Rs 2.5 lakh take-home.
Personal loan EMI: Rs 1.1 lakh.
Household expenses: Rs 75,000.
LIC premium: Rs 3,300 monthly (Rs 40,000 yearly).
SIP: Rs 3,000.
PF: Rs 20,000 monthly (employer + employee).
This leaves very little free cash. Your EMI alone is 44% of salary. That is a serious strain.
? Personal Loan Size Needs Urgent Action
Personal loan of Rs 50 lakh is risky.
Unlike home loans, personal loans give no tax benefit.
Interest is high and not wealth-building.
It affects credit score, savings, and peace.
You must make this a top priority.
? Stop All Voluntary SIPs Temporarily
Pause Rs 3,000 SIP until you create breathing room.
Investment is good, but not with pressure.
Restart after loan EMI drops or income rises.
Saving in stress brings no emotional peace.
? Review and Surrender LIC Policies
Check if policies are traditional, endowment, or money-back types.
These give low returns and long lock-ins.
If they are not term insurance, consider surrendering.
Use surrender value to reduce personal loan principal.
Invest future premiums in SIPs through a CFP-backed MFD.
Investment-cum-insurance policies don’t suit your current profile.
? Start a Side Emergency Buffer
Keep aside Rs 20,000 minimum for emergencies.
Use RD or high-yield savings account.
Don’t touch PF or take PF loan unless unavoidable.
Emergency buffer avoids future debt during crisis.
? Reduce Household Expenses by 10%
Monthly expenses are Rs 75,000.
Target reduction of Rs 7,500 monthly.
Use strict budgeting.
Cut non-essential spends like dining, OTT, gadgets.
Negotiate utility bills, school fees, subscriptions.
Every rupee saved can reduce loan faster.
? Target Yearly Bonus and Windfalls for Loan Prepayment
Use every bonus, incentive, or gift for principal prepayment.
Even Rs 50,000 once a year helps reduce EMI term.
Prepaying early saves high interest burden.
One-time lumpsum hits reduce future pressure.
Avoid using bonuses for vacations or upgrades.
? Avoid Top-Ups, Credit Card Debt, or New Loans
Do not take top-up on personal loan.
Avoid using credit cards for EMIs or daily spending.
Don't opt for zero-cost EMI schemes.
Stick to debit-based spending.
? Explore Balance Transfer Only If Clear Savings Exist
Balance transfer to lower rate works only if interest saved is significant.
Beware of hidden processing charges and new loan term resets.
Avoid new tenure exceeding 5 years.
If interest rate drops by at least 2%, consider it.
? Increase Income Through Small Side Hustles
With a stable job, weekend work can help.
Freelancing, online coaching, or part-time skills work.
Even Rs 10,000 extra monthly helps.
Use all extra income only for prepaying the loan.
? Avoid Using Flat or Car as Loan Security
You already own a flat and car without EMI.
Do not use them for LAP (loan against property).
That will risk your owned asset.
Keep your flat as emotional and financial protection.
? Make Loan Closure a 3-Year Goal
Instead of 5 years, try targeting 3 years.
This needs lifestyle discipline and focus.
Early closure will reduce total interest paid.
Use surrender value, savings, bonuses to chip away every 3 months.
? Don’t Withdraw PF Prematurely
PF is for long-term retirement.
Don’t touch it for loan repayment.
PF withdrawal also affects compounding.
You already contribute Rs 20,000 monthly, which is good.
? Health and Term Insurance is Critical
Ensure you have a separate term policy.
Avoid mixing LIC with protection.
Take Rs 50 lakh to Rs 1 crore pure term cover.
Also buy health insurance outside work policy.
Illness expenses should not become new debt.
? Avoid Emotional Traps While Repaying
Some feel social pressure to maintain lifestyle.
Focus on loan-free life instead.
Say no to gifts, parties, or status spends.
Keep your goals simple and clear.
Mental peace is the real status.
? Use a Monthly Loan Reduction Tracker
Track how much you reduce principal each month.
Write down prepayments.
Celebrate small milestones.
Tracking builds confidence and discipline.
? Keep Bank Accounts Simple
One salary account. One saving account.
Avoid multiple accounts.
Use one account only for EMI and fixed bills.
Transfer rest to savings or RD to avoid spending it.
? Keep Only Essential LIC Policies
If you have ULIP, endowment or money-back policies, consider exit.
LIC policies with return + insurance combo are inefficient.
Use surrender money to reduce debt.
Future savings should go to SIP in regular funds.
Regular funds through CFP-backed MFD provide better handholding.
? Future Investments Must Be Goal-Based
After loan closure, start SIP of Rs 10,000 minimum.
Invest through a Certified Financial Planner-backed MFD.
Don’t invest in direct funds without guidance.
Direct funds lack service, handholding, and emotional management.
Regular funds ensure rebalancing and right fund matching.
? Avoid Index Funds in Future Investments
Index funds don’t protect against falling markets.
All companies in index are invested in blindly.
No exit from poorly performing stocks.
Actively managed funds offer better selection and review.
A CFP-backed MFD helps in choosing good funds.
? Don’t Plan Based on Future Appraisals
Base your plan only on current income.
Don’t assume future salary hikes to solve problems.
Use actual savings and bonuses for action.
? Engage a CFP to Monitor Progress
A Certified Financial Planner brings accountability.
Keeps track of insurance, loan, cash flow and investments.
Helps you shift from loan zone to wealth zone.
Tracks emotional behaviour in markets or loans.
Makes sure you don’t repeat mistakes.
? Finally
You are already aware and proactive. That’s a strong start.
Your current loan pressure is high but manageable.
Restructuring lifestyle, policies and habits will free up cash.
Exit non-term LIC, pause SIPs, cut spends, prepay monthly.
Make the next 36 months loan-focused.
Freedom from loan opens space for real wealth creation.
Stay focused. Rebuild steadily after closure.
Financial freedom is not far when action is steady.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment