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My loan's 14yrs paid: Can I, sole earner for 6, repay early?

Ramalingam Kalirajan |10879 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jun 04, 2025

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

Question by mangesh on May 26, 2025Hindi

Hello sir I have a housing loan of 12lakhs for period of 20yrs and I have already paid for 14yrs my emi is 12000/- and I am sole earner of my house with family of 6 how can I repay my Loan at the earliest

Ans: You have taken a housing loan of Rs.12 lakhs.

You have already paid EMIs for 14 years.

Only 6 years of EMIs are remaining now.

Your current EMI is Rs.12,000 per month.

You are the sole breadwinner of your family of 6 members.

It is good to see you’ve stayed committed to your EMI.

You are now looking to close the loan early.

Let’s build a full 360-degree solution for you.

We will also protect your family’s financial security.

Your plan must be simple, practical, and stress-free.

Let’s begin step-by-step.

Understand Your Current EMI Status
You have paid EMIs for 14 out of 20 years.

That means most of the loan interest is already paid.

In early years, EMI mostly goes to interest.

Now, most EMI goes towards the loan principal.

So, benefit of prepaying now is lower than before.

Still, closing the loan early gives peace of mind.

You will save some interest.

You will also free Rs.12,000 per month later.

Know Why You Want to Close Early
Some people feel stress about having a loan.

Some want to reduce future commitments.

Some want to save on interest cost.

Some want to avoid loan in retirement.

If any of these reasons are true for you, that’s okay.

But we must also see if you are ready financially.

Your family depends only on your income.

So, closing the loan should not cause a cash shortage.

Think with both your head and heart.

Check Your Current Financial Health
Do you have a good emergency fund now?

Emergency fund means 6 months of your family expenses.

This should be kept in a safe and liquid option.

Do not use this fund to close the loan.

Also check if you have life and health insurance.

In your case, both are very important.

Because 6 people depend on your income.

Without proper insurance, loan closure is not the priority.

So, check these first before loan prepayment.

Protect Family with Insurance First
Take a pure term life insurance policy.

Sum assured should cover your income and loan.

Choose only term insurance.

Avoid any LIC or ULIP plan that mixes investment.

If you already have such policies, consider surrendering.

You can reinvest the amount in mutual funds.

Also, take health insurance for all family members.

One illness can drain savings faster than a loan.

Only after this step, look at closing the loan.

Review Your EMI Comfort Level
Rs.12,000 EMI is not a high burden.

If your income allows, you may continue it.

If it strains your budget, we can look for relief.

But don’t stop EMI without proper plan.

Also, don’t divert essential monthly savings.

Let us now explore different ways to close the loan early.

Method 1: Use Bonus or Lump Sum Income
If you get a bonus or one-time income, use that.

Don’t spend it fully on personal expenses.

Use part of it to reduce your loan balance.

Even a partial payment shortens the loan.

You can prepay once a year if you get yearly bonus.

Some banks allow prepayment without charges.

Just check the terms with your bank.

This is one simple way to repay early.

Method 2: Increase EMI Slightly
If your income allows, raise your EMI amount.

Even Rs.3,000 extra per month helps reduce tenure.

You can contact the bank to increase EMI voluntarily.

Higher EMI means more principal is paid monthly.

Your loan ends sooner, with less interest.

This method is easy and builds discipline.

But do this only if your monthly budget allows.

Do not affect household needs or savings.

Method 3: Start a Monthly Loan Reduction SIP
Open a separate bank account just for loan closure.

Deposit extra Rs.2,000–Rs.5,000 monthly into it.

Use it to make part-payments every 6 months.

This method keeps your EMI same.

But allows extra cash to reduce the principal.

Even small amounts create big impact in long term.

Do not stop this SIP in between.

This is a slow but steady strategy.

Method 4: Liquidate Poor or Idle Investments
Do you hold LIC or ULIP policies?

These give poor returns and high charges.

You can surrender them and use the amount.

Use part of that to repay the loan.

Use the balance to invest in mutual funds.

Also check for any fixed deposits with low return.

You can break them and use funds better.

Don’t use emergency funds or retirement funds here.

Method 5: Avoid Real Estate Investment Again
Some people think of selling one house to repay another.

Or they buy another property and take more loan.

Avoid such steps.

Real estate is not liquid and gives no regular income.

You already have a housing loan.

Focus on becoming debt-free first.

Avoid adding more real estate exposure.

Use funds to repay and invest, not to buy land.

Don’t Ignore Your Long-Term Goals
Loan repayment is a short-term goal.

But retirement and family needs are long-term.

Don’t use all money only to repay loan.

Keep investing for long-term wealth.

Mutual funds are best option for this.

Use regular plans with a Certified Financial Planner.

Avoid direct funds.

Direct funds give no guidance or review.

Regular funds with CFP give full 360-degree help.

Problems with Direct Mutual Funds
Direct mutual funds look cheaper.

But they give no advice or tracking.

You are left alone to choose, monitor, switch.

Many people select wrong funds.

This affects goal achievement badly.

With regular plan and CFP, you get expert support.

You get annual reviews, switching help, rebalancing.

This makes your investment aligned to life changes.

Never choose funds based on online trends or friends’ tips.

Importance of Mutual Fund Planning
Mutual funds create real long-term wealth.

Better than FDs, insurance, gold or real estate.

If you close your loan early, start investing after that.

Even now, invest monthly if you can.

SIPs of Rs.2,000 or Rs.5,000 create strong future wealth.

You can plan retirement, education, or family needs.

Start with few diversified equity and hybrid funds.

Continue it till age 60 or beyond.

Review this yearly with a CFP.

Protect Your Family While Closing Loan
Your biggest responsibility is your family’s safety.

Loan closure should not reduce emergency savings.

Ensure enough money is there for any crisis.

Keep health insurance active always.

Build a solid foundation first.

Then focus on removing loan.

And finally build wealth with mutual funds.

This gives a full-circle financial plan.

Use Guidance from Certified Financial Planner
A CFP sees your situation from all angles.

They suggest the right amount to repay and invest.

They match your goals with fund types.

They track and revise the plan yearly.

This support helps you avoid costly mistakes.

Use a CFP + MFD combo to create a stress-free plan.

Never take investment decisions alone.

Professional guidance creates peace and wealth together.

Finally
You have done well by paying EMIs for 14 years.

You are now close to loan closure.

But don’t rush or take emotional decisions.

First secure your insurance, savings and emergency fund.

Then use bonuses or extra savings to reduce loan.

Increase EMI or create a loan closure SIP.

Don’t ignore mutual fund investments for long-term growth.

Use regular mutual funds via CFP to guide your journey.

A balance between safety and growth brings best results.

You can be debt-free and wealthy with a simple plan.

Start today and stay consistent.

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.