Home > Money > Question
Need Expert Advice?Our Gurus Can Help

Stuck with a debt of 1 crore 15 lakhs, what should I do?

Ramalingam

Ramalingam Kalirajan  |9730 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 21, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Asked by Anonymous - Dec 20, 2024Hindi
Money

I have a debt of 1 crore 15 lakhs with rate of interest 8.6 % and I can pay 10 lakh yearly in addition to my EMI's. Is it better to invest those 10 lakhs in SIP or Pre-pay my loan and clear debt or wait till the SIP matures and use that lump sum to pay the loan?

Ans: You are in a financially challenging yet manageable situation. The right decision will depend on a careful assessment of your goals and circumstances. Here's a detailed evaluation of the two options: prepaying your loan versus investing in SIPs.

Key Factors to Consider
Interest Cost on Loan

Your loan interest rate of 8.6% is substantial.
The interest cost accumulates if the loan tenure is long.
Prepaying can save interest and reduce loan tenure.
Potential SIP Returns

SIPs in actively managed equity mutual funds can yield 10%-12% annually over the long term.
The returns are market-linked and not guaranteed.
Market volatility impacts short-term results.
Liquidity Needs

Prepaying reduces debt but locks funds.
SIPs provide liquidity for emergencies or goals.
Tax Implications

No tax benefit for loan prepayment beyond the Rs. 2 lakh interest deduction in housing loans (if applicable).
SIP investments in equity mutual funds have specific capital gains tax rules.
Benefits of Loan Prepayment
Lower Interest Burden

Immediate reduction in the interest portion of EMI.
Reduces overall debt faster.
Psychological Relief

Eliminates financial stress of a high loan.
Provides peace of mind with reduced liabilities.
Guaranteed Savings

Savings on interest is assured and risk-free.
Benefits of SIP Investment
Potential Wealth Creation

Long-term equity SIPs can outpace loan interest rates.
Compounding benefits enhance returns over time.
Flexibility

SIPs offer systematic withdrawal plans for liquidity.
Funds remain accessible during emergencies.
Diversification

Investments grow alongside other assets, increasing net worth.
Assessing the 360° Perspective
Debt and Emotional Comfort

A Rs. 1.15 crore debt can cause financial and emotional strain.
If reducing stress is your priority, prepayment is preferable.
Investment Risk Appetite

SIPs suit those willing to accept market volatility for higher returns.
If you dislike risk, prioritize prepayment.
Long-Term Financial Goals

Use SIPs for retirement, children’s education, or other life goals.
Prepaying helps if clearing debt is your primary focus.
Income Stability

Regular income supports SIPs without disrupting EMI payments.
Uncertainty in earnings favors prepayment.
Tax Considerations in Detail
Loan Prepayment

Offers no additional tax benefits after claiming the Rs. 2 lakh housing loan interest deduction.
SIP Investment

Gains above Rs. 1.25 lakh in equity funds are taxed at 12.5% (LTCG).
Short-term gains are taxed at 20%.
Debt funds are taxed as per your income slab.
Hybrid Approach: The Best of Both Worlds
Split the Rs. 10 lakh yearly allocation into two parts.

Use Rs. 5 lakh to prepay the loan.
Invest the remaining Rs. 5 lakh in SIPs.
This strategy balances debt reduction and wealth creation.

Reduces debt steadily.
Allows market participation for higher returns.
When to Prioritise Loan Prepayment?
If you prefer guaranteed savings over potential market returns.
When nearing retirement and aiming for a debt-free life.
If financial stress is affecting your well-being.
When to Prioritise SIP Investments?
If you are comfortable with market fluctuations.
When your income can comfortably handle EMIs.
If long-term wealth creation is a key goal.
Key Recommendations for SIP Investments
Actively Managed Equity Funds

Seek funds with a consistent track record.
Regular plans via an experienced CFP provide expert guidance.
Avoid Index Funds

Actively managed funds outperform index funds in volatile markets.
Index funds lack flexibility and personalization.
Use Regular Funds Through an MFD

Avoid direct plans as they lack personalized advice.
MFDs with CFP credentials help in fund selection and monitoring.
Benefits of Splitting Investments
Balances debt reduction and growth.
Provides flexibility if circumstances change.
Reduces risk from overexposure to one strategy.
Final Insights
The decision depends on your priorities and risk tolerance. If reducing debt quickly offers peace of mind, prepay the loan. If long-term wealth creation aligns with your goals, consider SIPs. A hybrid approach balances these objectives effectively.

You are taking proactive steps toward financial freedom. Your disciplined approach ensures a secure financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
Money

You may like to see similar questions and answers below

Moneywize

Moneywize   | Answer  |Ask -

Financial Planner - Answered on Feb 17, 2024

Asked by Anonymous - Feb 17, 2024Hindi
Listen
Money
I am a woman, 35. A friend told me that investing in SIPs can help me repay my loan in about 10 years or so. I can invest maximum of Rs 70,000 per month for next 10 years. Could you please suggest how I should go about it? And, is it possible that SIPs can help me repay my loan?
Ans: I understand you're interested in using SIPs to repay your loan, and that's a great question! While SIPs can be a valuable tool for wealth creation, it's important to understand their limitations and carefully consider your specific situation before making any decisions.

Here's what you need to know:

SIPs and loan repayment:

• SIPs are not a direct way to repay your loan. They invest your money in mutual funds, which grow over time based on market performance. There's no guarantee of returns, and it's crucial to remember that the stock market can fluctuate.
• However, SIPs can help you build a corpus that you could potentially use to repay your loan in the future. This is especially true if your SIP investments outperform your loan interest rate.

Factors to consider:

• Loan details: What type of loan is it (e.g., personal, home, education)? What's the interest rate and remaining tenure?
• Investment goals: Are you primarily focused on repaying the loan, or do you also have other financial goals (e.g., retirement, child's education)?
• Risk tolerance: How comfortable are you with potential market fluctuations? SIPs in equity funds offer higher potential returns but also come with higher risk.

Possible approaches:

• Invest alongside your EMI payments: This can help you build wealth while making regular loan payments. However, ensure you don't overextend yourself financially.
• Focus on building a corpus: If your loan terms allow, prioritise building a corpus that can cover a significant portion of your loan later. This approach involves higher risk but potentially faster repayment.

Important notes:

• Consult a financial advisor: Given your specific circumstances and risk tolerance, consulting a qualified financial advisor is highly recommended. They can help you create a personalised plan that aligns with your goals.
• Do your research: Understand different mutual fund categories (equity, debt, hybrid) and their risk-return profiles before investing.
• Start small and increase gradually: Begin with a comfortable SIP amount and gradually increase it as your income grows.

Remember:

• SIPs are a long-term investment strategy. Don't expect immediate results.
• Market fluctuations can impact your returns. Stay disciplined and avoid knee-jerk reactions.

I hope this clarifies the potential of SIPs for loan repayment. While they can be a helpful tool, careful planning and professional guidance are crucial for success.

..Read more

Ramalingam

Ramalingam Kalirajan  |9730 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 17, 2024

Asked by Anonymous - May 17, 2024Hindi
Listen
Money
Hi I have ab EMI of 28k per month, i also have SIP of 16k form last 4 years (started with 10k). Will it be a good decision to use fund valuation amount to settle (or reduce) loan and start SIP for around 45k-50k?
Ans: It’s commendable that you have been consistent with your SIP for the last four years. Your disciplined approach shows a commitment to long-term financial goals. Balancing an EMI of ?28,000 with an SIP of ?16,000 indicates a good grasp of financial planning.

However, evaluating whether to use your SIP funds to reduce your loan requires a careful analysis of several factors.

Loan Repayment vs. Investment Growth
Consider the interest rate on your loan. If your loan interest rate is higher than the average returns on your SIP, it might make sense to repay the loan.

Reducing your debt can also provide a sense of financial relief and improve your cash flow.

Opportunity Cost of Withdrawing SIP
By withdrawing your SIP, you may lose out on potential future gains from compounding.

Investments typically grow over time, and redeeming them prematurely could hinder your financial growth.

The decision should weigh the immediate benefit of debt reduction against the long-term benefit of staying invested.

Impact on Financial Goals
Reflect on your financial goals. If you use your SIP funds to pay off the loan, will you be able to rebuild your investment corpus quickly?

Starting a higher SIP of ?45,000-?50,000 is a good plan, but it will take time to recover the withdrawn amount.

Benefits of Actively Managed Funds
If you decide to continue investing, consider actively managed funds.

These funds are managed by experts who aim to outperform the market. Unlike index funds, actively managed funds offer the potential for higher returns, though they come with higher fees.

Professional Guidance
Consulting a Certified Financial Planner can provide personalized advice. A professional can help you assess the best strategy based on your specific financial situation and goals.

Evaluating Direct vs. Regular Funds
Direct funds might seem cost-effective, but they lack the professional guidance offered by regular funds.

Investing through a Mutual Fund Distributor (MFD) with a Certified Financial Planner credential ensures you receive expert advice.

This can help in making informed decisions and potentially achieving better returns.

Empathy and Understanding
We understand that managing an EMI and investments simultaneously can be challenging. Your desire to make the best financial decision is important.

By carefully considering your options and seeking professional guidance, you can navigate this decision effectively.

Conclusion
In conclusion, using your SIP funds to pay off your loan could provide immediate relief, but it might impact your long-term financial growth.

Balancing debt repayment with continued investment requires careful planning.

Consult a Certified Financial Planner to help you make an informed decision that aligns with your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9730 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 12, 2024

Asked by Anonymous - Jul 15, 2024Hindi
Money
Hi, I am 30 years old. I am already investing in MF, stocks and crypto. My total SIP is 20k per month. I am planning to increase my SIP ko 40k. I have a loan amount of 24L with interest rate of 8.60%. My question is.. should I first clear my loan amount or should I increase my SIP to 40k ??
Ans: You're 30 years old and actively investing in mutual funds (MF), stocks, and cryptocurrency, with a SIP of Rs 20,000 per month. You're also considering increasing your SIP to Rs 40,000. You have a loan of Rs 24 lakhs at an interest rate of 8.60%.

Before making a decision, it's important to take a close look at your financial situation.

Loan Repayment vs. Increased SIP
Interest Rate on Loan: The interest rate of 8.60% on your loan is moderate. Paying off this loan will give you a guaranteed return equivalent to this rate. This is because every rupee you repay saves you from paying 8.60% in interest.

Expected Returns on Investments: Investments in mutual funds, stocks, and even cryptocurrency can potentially give you returns higher than 8.60%. However, these returns are not guaranteed and carry a certain level of risk.

Risk Appetite: Your ability to handle financial risk plays a crucial role in this decision. If you're comfortable with some volatility and risk, you may choose to invest more. However, if you're risk-averse, clearing your loan may provide peace of mind.

Debt-Free Living: Being debt-free is a huge financial relief. Clearing your loan would remove the burden of monthly EMI payments. This would free up more of your income for other purposes in the future.

Assessing the Impact of Increasing SIP
Long-Term Wealth Creation: Increasing your SIP to Rs 40,000 will likely accelerate your wealth creation. If the market performs well, you could see significant growth in your investments over the years.

Power of Compounding: By increasing your SIP, you're leveraging the power of compounding. This could result in exponential growth of your investments in the long term. Even small increments in SIP can have a substantial impact over time.

Diversification Benefits: By increasing your SIP, you can potentially diversify more into different funds, reducing overall risk. A well-diversified portfolio can help balance out market volatility.

Weighing the Emotional and Psychological Aspects
Debt Stress: Carrying a loan can be mentally taxing. The pressure of owing money can sometimes outweigh the potential benefits of investing. Clearing your loan can relieve this stress and give you financial freedom.

Investment Uncertainty: The stock market and other investments are inherently unpredictable. There might be market corrections or downturns, and this could affect your returns. If this uncertainty worries you, paying off the loan might be the better option.

Confidence in Investment Strategy: If you have confidence in your current investment strategy and believe in the potential of your chosen funds, increasing your SIP can be a sound decision. But ensure you’re ready for the ups and downs of the market.

Analytical Insights: Pros and Cons
Increasing SIP Pros:

Potentially higher long-term returns.
Leverages the power of compounding.
Greater diversification opportunities.
Increasing SIP Cons:

Market risk and volatility.
Continued loan repayment obligation.
Loan Repayment Pros:

Guaranteed savings at 8.60%.
Debt-free living.
Reduced financial stress.
Loan Repayment Cons:

Opportunity cost of not investing more in the market.
Slower wealth accumulation in the short term.
Impact on Your Future Financial Goals
Early Loan Repayment: If you prioritize paying off your loan, you may achieve a debt-free status sooner. This could open up more opportunities for investment in the future, as all your income will be available for wealth creation.

Increased SIP for Future Growth: If you choose to increase your SIP, you're aiming for larger growth in your portfolio. This could help you reach financial goals like retirement, buying a home, or funding education more quickly.

Considerations for Making a Decision
Current Financial Stability: Assess your current financial situation. Do you have an emergency fund? Are you able to comfortably meet your monthly expenses while increasing your SIP?

Life Stage and Goals: Consider your life stage and financial goals. If you have major life events coming up, like buying a house or planning for children’s education, these will influence your decision.

Loan Tenure: The remaining tenure of your loan is crucial. If you have a long tenure left, paying off the loan early might make more sense. However, if the tenure is short, focusing on investment might be more beneficial.

Final Insights
Balanced Approach: You might consider a balanced approach, where you increase your SIP but also make occasional extra payments towards your loan. This way, you can grow your investments while gradually reducing your debt.

Emergency Fund Importance: Ensure you have an emergency fund before committing to either option. This fund should cover at least 6 months of expenses, providing a safety net in case of unexpected financial needs.

Consult a Certified Financial Planner: Though you are well-informed, it could be beneficial to discuss your situation with a Certified Financial Planner. They can provide personalized advice based on your financial goals, risk tolerance, and current financial status.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9730 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 22, 2025

Asked by Anonymous - May 18, 2025
Money
Hello I am 36 years old, married blessed with 2 daughters. My wife is also earning, she is taking care of kids education currently. I have an ongoing home loan with current outstanding loan of 70L. My current EMI is close to 63K per month. Remaining Tenure 205 months. My take home in-hand salary is around 1.7L per annum. So apart from EMI, house expenses+ giving money to the family comes to around 50K per month. I have started investing around 45k per month as SIP. My current investments into SIP is around 15L. My aim is to be debt free . Is it good idea to reduce the loan with this SIP investment?
Ans: You are 36 years old, married, and father of two daughters. Your wife is working and currently managing the children’s education. You are repaying a home loan with Rs. 70 lakh outstanding. The EMI is Rs. 63,000 per month, and the tenure left is 205 months. Your monthly in-hand salary is Rs. 1.7 lakh. After EMI and family expenses of Rs. 50,000, you are still investing Rs. 45,000 per month as SIP. Your total SIP corpus is Rs. 15 lakh.

You want to become debt-free. You are wondering if it is a good idea to use your SIP corpus to reduce the loan.

Let us evaluate your situation from all angles.



Income and Expenses Review
You have Rs. 1.7 lakh monthly salary. That is a decent and stable income.



Rs. 63,000 goes as EMI. Rs. 50,000 for household and family support.



This leaves you with Rs. 57,000 per month.



Out of this, you are investing Rs. 45,000 SIP per month.



That means you are managing well and maintaining savings discipline.



Excellent financial behaviour. Most families cannot save this much.



SIP Investment Progress
You already built Rs. 15 lakh through SIPs. That’s a great start.



You are in the habit of regular saving. This is your biggest strength.



SIPs are long-term wealth creators. The key is consistency.



If you stay invested, this corpus will grow significantly over time.



But you are now considering redeeming it to reduce home loan.



Let us understand both sides clearly.



Home Loan Status
Rs. 70 lakh loan outstanding. 205 months remaining. EMI is Rs. 63,000.



This is a long-term liability. But it is a structured one.



You are not struggling with EMI. That is important to note.



Home loans come with tax benefits. Interest and principal both give deductions.



It helps reduce your taxable income.



Reducing this loan sounds good emotionally, but may not be best financially.



Should You Use SIP Corpus to Prepay Loan?
Let us evaluate this carefully.



Using Rs. 15 lakh from SIP to reduce loan will bring down EMI or tenure.



But it will stop the compounding of that Rs. 15 lakh.



SIP in mutual funds has potential to deliver higher returns than loan interest.



Over long-term, equity mutual funds grow faster than the cost of a loan.



So keeping SIP invested gives better wealth growth.



You will also lose liquidity if you prepay loan. That’s a risk.



In case of job loss or emergency, you can’t get money back from loan.



But SIP corpus is accessible if really needed.



So using SIP to reduce loan is not advisable at this stage.



Your loan EMI is not hurting your budget. So you can continue as is.



What Can Be Done Instead?
You can follow a balanced and flexible strategy.



Continue your Rs. 45,000 SIP. Do not stop it.



Split this SIP amount into growth-oriented and hybrid mutual funds.



Use actively managed funds. Avoid index funds. Index funds follow market blindly.



In down markets, they fall equally. No protection during correction.



Actively managed funds aim to reduce downside and find better growth.



Choose regular plans via a Certified Mutual Fund Distributor working with a Certified Financial Planner.



Direct funds don’t offer advice or review. You will miss strategic help.



Regular plans come with personalised support and ongoing monitoring.



That is more valuable than slightly lower expense ratio.



Use part of your growing SIP corpus later for home loan prepayment in 4-5 years.



This way you benefit from compounding and debt reduction.



Debt Freedom Goal – A Step-by-Step Plan
You want to become debt-free. That’s a powerful goal. Let’s plan for it.



Don’t aim to close full loan immediately. Plan for a staged prepayment.



Every 3 to 5 years, use part of your corpus to reduce principal.



This shortens loan tenure and reduces interest burden.



At the same time, keep investing parallelly.



Maintain a clear balance between long-term investment and debt reduction.



Avoid emotional decisions. Focus on long-term financial logic.



Reinvest bonuses or surplus into mutual funds. Use them later for bulk prepayment.



Avoid pulling SIP corpus unless you have a shortfall in emergencies.



You can use part of SIP corpus to prepay loan when it crosses Rs. 25 to 30 lakh.



Emergency Fund and Liquidity
Do you have an emergency fund? If not, create one soon.



Keep 6 months’ expenses as reserve. Use liquid or ultra-short-term funds.



Do not invest emergency fund in equity. Keep it separate.



Emergency fund gives peace and safety. Never use it for loan prepayment.



Child Education and Family Planning
Your wife is handling kids’ education. That gives you flexibility.



In a few years, education costs will rise. Plan early.



Use goal-based investing for each child’s milestone.



SIPs should be mapped to each goal. Use separate folios if needed.



Review each goal with a Certified Financial Planner once a year.



Do not mix children’s education fund with loan prepayment plans.



Keep goals separate for clarity and better management.



Insurance Protection Check
Do you have a term life cover? Make sure it’s 10x your yearly income.



Home loan is big. Your family needs safety if anything happens.



Do not rely on ULIPs or endowment plans. They give poor cover and low returns.



If you hold such policies, consider surrendering. Reinvest that money in mutual funds.



Health insurance is a must for you and family.



Even if your employer provides cover, keep personal cover too.



It helps after job switch or retirement.



Tax Planning Insight
You can claim Rs. 1.5 lakh under 80C for home loan principal.



Claim interest up to Rs. 2 lakh under section 24.



SIP in ELSS mutual fund also gives 80C benefit.



But don’t invest just for tax saving. See overall returns too.



Keep documentation ready for all claims.



Final Insights
You are already on the right track. You are managing EMI, expenses, and still investing. That shows discipline.



Using SIP corpus now to reduce loan is not the best decision.



Continue investing. Let compounding build your wealth. Use partial corpus in future for prepayment.



Stay invested in regular mutual fund plans through Certified MFDs associated with CFPs.



Avoid index and direct funds. They lack guidance, risk control, and personalised support.



Build a strong base with emergency fund, term insurance, and goal-based SIPs.



You are young. Your income is growing. Let time and planning work for you.



You can become debt-free and financially secure within 8 to 10 years.



Stay focused. Review once a year. Avoid panic or shortcuts.



You are doing great. Just stay steady.



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

..Read more

Ramalingam

Ramalingam Kalirajan  |9730 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 29, 2025

Asked by Anonymous - May 19, 2025
Money
Hello I am 36 years old, married blessed with 2 daughters. My wife is also earning, she is taking care of kids education currently. I have an ongoing home loan with current outstanding loan of 70L. My current EMI is close to 63K per month. Remaining Tenure 205 months. My take home in-hand salary is around 1.7L per annum. So apart from EMI, house expenses+ giving money to the family comes to around 50K per month. I have started investing around 45k per month as SIP. My current investments into SIP is around 15L. My aim is to be debt free as soon as possible . Is it good idea to reduce the loan with this SIP investment, can you please suggest?
Ans: You have already taken good steps. Balancing EMI, expenses, and SIPs is not easy. You are doing it well.

As a Certified Financial Planner, let me assess your situation in a 360-degree manner and provide a comprehensive, actionable insight. Your question about using SIP investments to reduce home loan needs a complete analysis.

Let’s go step by step.

Family and Life Stage
You are 36 years old. So, you have good working years left.

You are married and have two daughters. So, future goals will include their education and marriage.

Your wife is earning and taking care of kids’ education. This is a strong support system.

You have mentioned your current home loan of Rs 70L. This is your major liability.

You are already investing Rs 45K per month. This shows financial discipline.

Your monthly EMI is Rs 63K. Household and family support expenses come to Rs 50K.

Your total monthly outflow is Rs 1.58L against Rs 1.7L salary. This is quite tight.

Let Us First Understand Your Cash Flow Position
Total income: Rs 1.7L per month.

Total committed outflows (EMI + Expenses): Rs 1.58L.

SIPs: Rs 45K (included in above).

Surplus left: Just Rs 12K monthly.

So, your budget is tight. No room for sudden expenses.

Any unplanned expense will disturb your SIP or EMI.

Let Us Examine Your Current SIP Investment Strategy
You have already accumulated Rs 15L in mutual fund SIPs.

You are contributing Rs 45K monthly.

You have not specified if funds are regular or direct. But if they are direct plans, it is better to switch.

Direct plans have no support or monitoring.

With regular plans via Certified Financial Planner, you get guidance and review.

An MFD with CFP can help you rebalance, switch at the right time, and set goal-linked investments.

You avoid emotional mistakes when a CFP handles the plan.

Regular plans cost slightly more. But that cost gives better control and peace.

Investment should not be only return-focused. It should be goal-focused.

Should You Use SIP Corpus of Rs 15L to Repay Home Loan?
This is the key question. Let us assess it properly.

Pros of Repaying Part Home Loan Using Rs 15L

Your EMI burden reduces immediately.

You feel psychologically free.

You may reduce EMI or loan tenure.

Paying off part loan helps reduce total interest paid.

This brings short-term relief in tight budget.

Cons of Using SIP for Loan Repayment

You lose the power of compounding.

Your SIPs are long-term wealth creators.

Equity mutual funds beat home loan rates over time.

If your loan interest is 8.5%, SIPs can grow at 11% to 13% annualised.

You may face tax impact. LTCG above Rs 1.25L taxed at 12.5%. STCG taxed at 20%.

You will break financial discipline.

Once corpus is gone, rebuilding takes time.

You will fall short during future goals like daughters’ education.

Don’t sacrifice long-term wealth for short-term comfort.

So, using SIP corpus for loan repayment is not recommended at this stage.

Let’s Discuss Better Ways to Handle Your Loan
Instead of breaking SIPs, you can do the following:

Prepay loan partly from annual bonus, incentives or windfall income.

Whenever you receive salary hike, increase EMI voluntarily.

Even Rs 2K–5K extra per month reduces interest drastically.

Avoid increasing lifestyle expenses as income rises.

Don’t fall into the trap of buying new car or luxury items.

Focus on being debt-free early by using extra income, not investments.

Another option is to reduce loan tenure instead of EMI when prepaying.

That reduces total interest much faster.

Also ensure home loan is on floating rate. Recheck current rate with bank.

If bank is not reducing interest rate with market, consider refinancing.

Home loan interest is a good tax-saving tool. Section 24 gives Rs 2L benefit.

So, don’t rush to close it if you have no other tax savings left.

Let Us Now Consider Your Future Financial Goals
This is important for a 360-degree view.

You have two daughters.

You will need funds for:

Higher education in 10 to 15 years.

Marriage after 15 to 20 years.

Your own retirement after 20+ years.

For these, you need long-term investments.

If you use SIP money now for loan, then you reduce future safety.

Stick to SIPs. Don’t break. In fact, increase when income rises.

Keep goal-wise SIP buckets. Label them. Track them separately.

Add child education and retirement SIPs as separate.

A Certified Financial Planner can help allocate funds for each goal.

So, your investment becomes structured and meaningful.

What About Emergency Funds?
You have tight cash flow now.

But you must still build emergency fund.

Keep at least 3 to 6 months of expenses in liquid fund or savings.

You can reduce SIP by Rs 5K temporarily to build this.

Don’t rely on credit cards or personal loan during emergency.

Keep this fund untouched except for real emergency.

What About Life and Health Insurance?
You have not mentioned any policies.

Make sure you have:

Term life insurance for minimum Rs 1 crore or 12x annual income.

No ULIP, no endowment, no investment-linked policies.

If you have such policies, you can surrender and move funds to mutual funds.

Take family floater health insurance of minimum Rs 10L coverage.

This saves you from medical shocks.

Review insurance every 2–3 years.

Should You Start Any New Investments Now?
Not needed immediately. You already have Rs 45K SIP.

But in future, consider:

Creating separate SIPs for daughters’ education.

Starting SIPs for your retirement.

Don’t invest in real estate for now.

Don’t go for annuities. They give poor returns and low liquidity.

Don’t go for index funds. They are passive and not flexible.

Actively managed funds by expert managers can beat index returns.

Your current SIP strategy should continue in actively managed funds.

Can You Stop SIP Temporarily If Needed?
Yes, but only in real emergency.

Don’t stop SIP just to feel comfortable.

Your goal is long-term wealth. Stay committed to SIP.

Reduce SIP temporarily by Rs 5K–10K if really needed.

But restart within 3–6 months.

Finally
Your financial discipline is strong. Maintain it.

Don’t break SIPs to repay home loan.

Use income rise or bonuses for partial prepayment.

Keep investing in actively managed mutual funds through CFP.

Don’t switch to direct plans. Stay with regular plans with professional help.

Keep insurance separate. Don’t mix it with investments.

Review your plan every 6–12 months with a CFP.

Focus on goal-based investing.

Stay invested for long term. Don’t rush to close loan if it disturbs your investment flow.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

..Read more

Latest Questions
Dr Dipankar

Dr Dipankar Dutta  |1752 Answers  |Ask -

Tech Careers and Skill Development Expert - Answered on Jul 15, 2025

Dr Dipankar

Dr Dipankar Dutta  |1752 Answers  |Ask -

Tech Careers and Skill Development Expert - Answered on Jul 14, 2025

Dr Dipankar

Dr Dipankar Dutta  |1752 Answers  |Ask -

Tech Careers and Skill Development Expert - Answered on Jul 14, 2025

Dr Dipankar

Dr Dipankar Dutta  |1752 Answers  |Ask -

Tech Careers and Skill Development Expert - Answered on Jul 14, 2025

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

Close  

You haven't logged in yet. To ask a question, Please Log in below
Login

A verification OTP will be sent to this
Mobile Number / Email

Enter OTP
A 6 digit code has been sent to

Resend OTP in120seconds

Dear User, You have not registered yet. Please register by filling the fields below to get expert answers from our Gurus
Sign up

By signing up, you agree to our
Terms & Conditions and Privacy Policy

Already have an account?

Enter OTP
A 6 digit code has been sent to Mobile

Resend OTP in120seconds

x