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Harsh

Harsh Roongta  | Answer  |Ask -

Answered on Dec 24, 2019

Qayyum Question by Qayyum on Dec 24, 2019Hindi
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I have a home loan with SBI and the outstanding as on date is Rs 11 lakh. The rate of interest is 11.45 per cent. I am presently paying the EMI from the rental income from this house. 

Does it make sense to pay off the outstanding by breaking an FD that I presently hold, or should I just continue with the EMIs for the rest of the tenure?

Ans: No FD can possibly give you an interest rate that will exceed the interest rate you are paying on the home loan. Liquidate the FD and payoff the home loan immediately.

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.
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Ramalingam

Ramalingam Kalirajan  |6995 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 13, 2024

Asked by Anonymous - May 07, 2024Hindi
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Iam 30 years old ,and i have an outstanding home loan of 30 lacs, iam earning 20 lacs a year tax free, I have invested in various mfs and my current value of assets are around 30 lacs, iam getting good returns on my investments (average rate of 18%), 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 get married within 2 years and was thinking of becoming loan free before getting married.
Ans: Financial Decision: Pay Off Home Loan or Continue Investing?

At 30, with a tax-free annual income of 20 lacs and investments valued at 30 lacs, you're in a comfortable financial position. Let's analyze your options regarding your outstanding home loan of 30 lacs and whether to continue paying EMIs or close the loan:

Advantages of Continuing EMIs:

Investment Growth: Your investments are performing well with an average rate of return of 18%. By continuing to pay EMIs and letting your investments grow, you can potentially earn higher returns than the interest rate on your home loan.

Liquidity: By keeping your investments intact, you maintain liquidity and flexibility. This can be beneficial in case of any unforeseen expenses or investment opportunities.

Tax Benefits: Home loan EMIs come with tax benefits on both principal repayment and interest paid. By continuing to pay EMIs, you can avail of these tax deductions, reducing your overall tax liability.

Advantages of Closing the Loan:

Debt-Free Status: Paying off your home loan will give you peace of mind and a sense of financial freedom. Being debt-free can reduce stress and provide a strong financial foundation for future goals, including marriage.

Reduced Interest Burden: By closing the loan early, you save on the interest that would have accrued over the remaining loan tenure. This can result in significant savings in the long run.

Improved Credit Score: Being debt-free can positively impact your credit score, which is essential for future financial endeavors like applying for additional loans or credit cards.

Recommendation:

Considering your financial stability, investment performance, and the possibility of marriage within 2 years, it's advisable to prioritize becoming loan-free before tying the knot. Here's why:

Financial Freedom: Eliminating debt before marriage can reduce financial stress and allow you to focus on building a strong foundation for your future family.

Reduced Financial Obligations: Being debt-free gives you more flexibility in managing joint finances with your future spouse and planning for shared goals like buying a house or starting a family.

Long-Term Benefits: While your investments are performing well, becoming debt-free provides a guaranteed return in the form of interest savings and psychological peace of mind.

Final Thoughts:

Considering the advantages of being debt-free and your stable financial situation, it's recommended to prioritize paying off your home loan before getting married. Review your financial plan with a Certified Financial Planner to ensure it aligns with your goals and aspirations.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6995 Answers  |Ask -

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

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Home loan is of 32lakh and emi is 29000, paying from last 7 year regularly. But now from next month no job so want to discontinued the emi but how and don't want dishonor it. Paying with 9.89 % of interest
Ans: To manage your home loan EMI when you're facing job loss, consider the following steps:

Review Your Financial Position
Check your savings and investments.

Assess the monthly inflows and outflows.

Identify any available emergency funds.

Speak with Your Lender
Contact your bank immediately.

Explain your job loss situation.

Ask for possible solutions.

Explore Loan Restructuring
Request for a moratorium period.

Negotiate for lower EMIs temporarily.

Extend the loan tenure if necessary.

Utilise Savings and Investments
Use liquid savings to cover EMIs.

Liquidate short-term investments if needed.

Tap into Insurance Policies
If you have an LIC policy, consider surrendering it.

Use the surrender value to pay EMIs.

Consider Personal Loans or Overdrafts
Apply for a personal loan to bridge the gap.

Opt for an overdraft against your fixed deposit.

Budget and Cut Expenses
Review and reduce monthly expenses.

Prioritise essentials over luxuries.

Seek Financial Support from Family
Ask for short-term financial assistance.

Consider it as a temporary measure.

Refinance the Loan
Look for banks offering lower interest rates.

Transfer your loan to reduce EMI burden.

Increase Cash Flow
Take up part-time or freelance work.

Sell unused assets for extra cash.

Avoid Defaulting on EMIs
Non-payment affects your credit score.

Strive to maintain a good repayment track.

Actively Look for a New Job
Update your resume and network.

Attend job fairs and apply online.

Consult a Certified Financial Planner
Seek professional advice for long-term solutions.

A planner can provide personalized strategies.

Benefits of Regular Mutual Funds
Regular funds offer professional management.

They provide better performance tracking.

Investing through a certified planner ensures guidance.

Disadvantages of Index Funds
Index funds have passive management.

They may not outperform the market consistently.

Lack of flexibility in changing market conditions.

Disadvantages of Direct Funds
Direct funds require self-management.

They may not be suitable for all investors.

Professional guidance is missing.

Final Insights
Addressing the EMI challenge needs immediate action. Prioritise communication with your bank. Utilise savings and investments wisely. Seek professional guidance for a sustainable solution. Maintaining financial stability is crucial during this period.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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