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28-Year-Old With Stable Job Seeks Advice: How Can I Finish My Home Loan Faster?

Ramalingam

Ramalingam Kalirajan  |9863 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 30, 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
Abhijeet Question by Abhijeet on Dec 30, 2024Hindi
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How to finish home loan faster

Ans: Paying off your home loan early while building wealth requires strategic planning. A parallel SIP in equity mutual funds can complement your goal by leveraging market growth over the long term. Here's a detailed approach:

1. Start a SIP in Equity Mutual Funds
Invest monthly in a diversified equity mutual fund for a period of 7+ years.
Equity funds historically offer higher returns over long periods, outpacing home loan interest rates.
Align your SIP amount with your financial capacity, ensuring consistency.
2. Time the Loan Closure with SIP Maturity
Use the maturity value of the SIP to make a lump sum prepayment towards your loan.
Ensure the investment horizon of the SIP is long enough to mitigate market volatility.
A 7-10 year SIP period can yield significant growth due to the power of compounding.
3. Continue Regular EMI Payments
Maintain your regular EMIs while running the SIP.
Do not compromise on timely loan payments to avoid penalties.
The parallel strategy reduces your loan tenure effectively when executed with discipline.
4. Focus on High-Interest Loan Years
Prepayments made during the initial years have the highest impact on interest savings.
Coordinate your SIP maturity during this time to maximise loan repayment benefits.
5. Leverage Tax Benefits on Both Ends
Claim tax deductions under Section 80C and Section 24(b) for home loan payments.
Equity mutual funds held for over a year qualify for long-term capital gains tax benefits.
Use the tax savings to either increase your SIP or make additional prepayments.
6. Step-Up Your SIP Amount Annually
Increase your SIP amount by 10-15% every year to match income growth.
A higher SIP contribution accelerates wealth accumulation for loan repayment.
7. Avoid Premature Withdrawal from SIP
Do not redeem SIP investments prematurely unless used for loan closure.
The longer you stay invested, the higher the growth potential.
8. Track Loan Tenure and SIP Performance
Regularly review your loan outstanding and SIP performance.
Align your repayment strategy with market conditions and financial goals.
9. Focus on Financial Discipline
Avoid new liabilities while managing your home loan and SIP.
Stick to a budget that prioritises both EMI payments and SIP contributions.
10. Plan for Surplus Investments
Channel any bonuses, tax refunds, or additional income into either SIPs or loan prepayments.
Small additional investments can significantly enhance your repayment capability.
Final Insights
Starting a parallel SIP in equity funds while paying regular EMIs creates a structured pathway to close your home loan early. Over time, the compounded growth from your SIP can ease the financial burden of a lump sum loan prepayment. This balanced strategy ensures financial growth and reduced debt simultaneously.

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.
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Ramalingam

Ramalingam Kalirajan  |9863 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 2024

Asked by Anonymous - Jun 22, 2024Hindi
Money
Hi, I have monthly salary 60k & My Wife have 40k in hand. We have 40lac Home loan, (Under construction),4lac in Equity, every month 12k goes into MF and current expenses including rent is 25k. How can i finish loan asap and accumulate 2cr.
Ans: Great to see you’re focused on your financial goals. Let’s dive into a detailed plan to help you finish your home loan ASAP and accumulate Rs. 2 crores.

Understanding Your Current Financial Situation
You both have a combined monthly income of Rs. 1 lakh. That’s a solid income stream. Your expenses, including rent, are Rs. 25,000. This leaves you with Rs. 75,000 every month for other financial commitments and savings.

Home Loan Strategy
Prioritizing Home Loan Repayment
Your home loan of Rs. 40 lakhs is a significant commitment. Paying it off early can save you a lot in interest payments. Here’s how you can tackle it:

Utilize Surplus Income: You have Rs. 75,000 left after monthly expenses. Consider allocating a portion of this surplus towards prepaying your home loan.

Increase EMI Payments: If possible, increase your EMI payments. Even a small increase can significantly reduce the loan tenure and interest burden.

Lump Sum Payments: Whenever you receive bonuses, incentives, or other windfalls, use them to make lump sum payments towards the principal. This will help in reducing the principal amount faster.

Tax Benefits: Don’t forget to take advantage of the tax benefits on home loan principal and interest payments. This can help reduce your taxable income, providing more funds for loan repayment.

Investment Strategy for Wealth Accumulation
Monthly SIPs in Mutual Funds
You’re already investing Rs. 12,000 per month in mutual funds. That’s a good start. Let’s optimize this:

Diversification: Ensure your SIPs are spread across various categories like large-cap, mid-cap, and small-cap funds. Diversification helps in balancing risk and returns.

Increase SIP Amount: As your income allows, gradually increase your SIP amount. This will help in accumulating wealth faster through the power of compounding.

Avoid Index Funds: Actively managed funds can outperform index funds as fund managers make strategic decisions based on market conditions. These funds adapt to market changes, aiming for higher returns.

Benefits of Regular Funds
Regular funds come with professional management. Fund managers make strategic decisions to maximize returns. While direct funds save on expenses, regular funds can potentially offer better performance due to expert management.

Compounding Effect
The power of compounding is your best friend in wealth accumulation. Reinvesting returns over time helps grow your wealth exponentially. Ensure your mutual fund investments are set to reinvest dividends and capital gains for maximum growth.

Emergency Fund and Insurance
Building an Emergency Fund
An emergency fund is crucial. It should cover at least 6-12 months of your expenses. Given your current expenses, aim to set aside Rs. 1.5-3 lakhs. Keep this fund in a liquid asset like a savings account or liquid mutual fund for easy access.

Insurance Coverage
Health Insurance: Ensure both of you have adequate health insurance coverage. Medical emergencies can drain savings quickly, so a comprehensive health plan is essential.

Life Insurance: Adequate life insurance provides financial security for your family in case of unforeseen events. Term insurance is a good option as it offers high coverage at low premiums.

Reviewing and Adjusting Your Plan
Regular Portfolio Review
Regularly review your investment portfolio. Assess the performance of each investment at least annually. Rebalance your portfolio based on changing market conditions and your financial goals.

Seek Professional Advice
A Certified Financial Planner can provide valuable insights and guidance. They can help you with periodic reviews and adjustments to ensure you stay on track to achieve your financial goals.

Tax Efficiency
Tax Planning
Effective tax planning helps maximize your returns. Utilize tax-saving instruments like Equity Linked Savings Scheme (ELSS), PPF, and NSC. Consult your financial planner to optimize your tax liability.

Risk Management and Diversification
Diversification
Diversification minimizes risk by spreading investments across different asset classes. Ensure your portfolio remains well-diversified to cushion against market volatility.

Risk Tolerance
Align your investments with your risk tolerance. Prioritize safety and stability over aggressive growth if you’re risk-averse.

Final Insights
You have a solid income and are already on a good path with investments. Prioritize home loan repayment by using surplus income, increasing EMIs, and making lump sum payments. Continue and increase your SIPs in diversified mutual funds for wealth accumulation. Build an emergency fund and ensure adequate insurance coverage. Regularly review and adjust your portfolio with professional guidance to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9863 Answers  |Ask -

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

Asked by Anonymous - May 25, 2025
Money
Hello Sir, I have a salary of Rs.51,000/- and have recently taken home loan of Rs. 25,00,000 with monthly Emi of 22834 and Home loan insurance of 43000 EMI of Rs 594.I invest 3000 per month SIP in small cap and 1500 per month in LIC.I am unmarried and will get marry in 1 year .How can I clear off my loan early . should I focus on investment or on prepayment of loan.
Ans: Understanding Your Current Financial Position
Your monthly salary is Rs. 51,000, which is a steady income source.

You have a recent home loan of Rs. 25 lakhs with EMI of Rs. 22,834.

Home loan insurance premium is Rs. 594 monthly, adding to fixed expenses.

Your current investments include Rs. 3,000 monthly SIP in small-cap mutual funds.

Additionally, you invest Rs. 1,500 monthly in LIC, which is mostly insurance cum investment.

You are unmarried but expect marriage in one year, which will impact expenses and income.

Your focus is on clearing home loan early or investing for better returns.

Appreciating Your Financial Discipline
Investing Rs. 4,500 monthly shows a good habit despite loan obligations.

Choosing small-cap funds suggests a higher risk appetite, aiming for good returns.

Home loan insurance adds protection, which is often overlooked by many.

Planning your finances before marriage is wise and helps set future goals.

Analyzing Your Loan Repayment Situation
The home loan EMI consumes nearly 45% of your monthly salary, a significant portion.

Prepaying the loan early will reduce overall interest paid and financial burden.

However, prepayment will require additional liquidity or cutting back on investments.

Home loan interest rates are generally lower than potential equity returns but not guaranteed.

EMI commitment reduces your monthly flexibility for emergencies or other goals.

Assessing Your Investment Choices
Small-cap mutual funds are volatile and can deliver high returns but with risks.

LIC policies mainly serve insurance needs but are less efficient for wealth creation.

Investment through direct mutual funds lacks professional monitoring and rebalancing.

Regular funds invested through a Certified Financial Planner (MFD) provide better guidance and monitoring.

Consider gradually shifting LIC investment into well-chosen mutual funds for clarity and growth.

Comparing Loan Prepayment vs Investment Growth
Prepayment reduces interest cost guaranteed, a risk-free return equal to the interest rate.

Small-cap fund returns are not guaranteed and can be volatile in short term.

Given your high EMI burden, prepayment can improve monthly cash flow in the long run.

Early loan closure reduces financial stress and increases your future disposable income.

But completely stopping investments may affect your wealth creation and inflation protection.

Balancing Loan Prepayment and Investments
Continue SIPs but consider reducing SIP amounts temporarily to boost loan prepayments.

Use any bonuses, increments, or extra income for lump-sum prepayments.

Ensure an emergency fund of at least 6 months’ expenses before aggressive prepayment.

Post-marriage, reassess your income and expenses and revise your strategy.

Maintain insurance coverage suitable for your changing life situation.

Managing Expenses and Increasing Savings
Track monthly expenses strictly and identify areas to reduce discretionary spending.

Postpone any non-essential expenses until the loan burden reduces.

Increase monthly savings gradually with salary increases or new income sources.

Avoid new loans or credit card debts that add to financial stress.

Risk Management and Insurance Review
Review LIC policies for relevance; many investment cum insurance policies are expensive.

If LIC policies are purely investment-linked and costly, consider surrendering and reinvesting in mutual funds.

Maintain adequate term life insurance separate from investment policies.

Health insurance is important; ensure you have coverage independent of the home loan insurance.

Future Planning Around Marriage
Marriage will increase your financial responsibilities and possibly income.

Post-marriage, revisit your budget, loan repayment, and investment plans.

Discuss financial goals jointly and plan investments accordingly.

Consider increasing SIPs or loan prepayments as income stabilises and expenses are understood.

Tax Planning Impact
Home loan principal and interest qualify for tax deductions; use these efficiently.

Mutual fund capital gains tax must be factored into redemption planning.

Prepayment may not yield immediate tax benefits but saves interest cost over tenure.

Keep track of all tax benefits from investments and loan repayments for better net savings.

Professional Portfolio Management
Investing through regular mutual fund plans managed by Certified Financial Planners improves discipline.

Active fund managers can adapt portfolio to changing market conditions unlike index funds.

Avoid direct fund investing without professional help; it lacks portfolio balancing and tax planning.

A well-managed portfolio ensures better risk control and goal alignment.

Practical Action Steps for You
Build an emergency fund equal to 6 months of expenses before aggressive prepayment.

Use salary increments, bonuses, or gifts to make lump-sum prepayments on home loan.

Reduce LIC investments; review and possibly surrender for better investment clarity.

Maintain SIP in small-cap funds but consider diversifying across actively managed funds.

Regularly monitor loan balance, interest cost, and investment growth for rebalancing decisions.

Post-marriage, update financial goals, expenses, and investments jointly.

Final Insights
Clearing home loan early will reduce your financial burden and interest paid.

Investments, especially small-cap funds, carry risk; don’t stop them completely.

Balance loan prepayment and investments for a healthy financial future.

Regular review with a Certified Financial Planner ensures optimal decisions.

Prepare financially for marriage and increased responsibilities with clear budgeting.

Avoid high-cost insurance-cum-investment plans; focus on pure insurance and mutual funds.

Tax benefits on loan repayment and investments enhance overall savings efficiency.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

..Read more

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Sir I got Dr Ambedkar institute of technology bangalore mechanical branch should I join it or take a drop?
Ans: Dr Ambedkar Institute of Technology Bangalore offers a well-recognized Mechanical Engineering program, accredited by NAAC and known for its government-aided status and experienced faculty—25–30% of whom hold doctorates from IITs and NITs. The college maintains a student-friendly campus with modern labs, digital libraries, robust hostel infrastructure, and Wi-Fi-enabled spaces. Placement rates for the mechanical branch fluctuate between 75–80% in recent years, with recruiters like Toyota, Bosch, and TCS participating. Faculty are widely regarded as supportive and knowledgeable, though some reviews mention limited research exposure and average practical applications. The academic environment is stable, with autonomous examination standards, frequent internships, and industry-linked projects, but students note that placements can be more competitive for core mechanical jobs compared to other engineering branches.

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If you value a strong peer group, established academic processes, and a conducive learning environment, Dr Ambedkar Institute of Technology’s mechanical branch is a prudent choice. Opt for this institute unless you have a clear plan to achieve a much higher-ranked program or preferred branch after a drop year, as the institution offers solid career prospects and industry acceptance. All the BEST for a Prosperous Future!

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Sir my daughter got 15900 KCET ranking and want to choose CSE branch in best college for her ranking in Bangalore, please suggest which engineering college will be better for CSE branch
Ans: For a KCET rank of 15 900, assured admission in Computer Science & Engineering is feasible at several reputable Bengaluru colleges whose closing ranks exceed this threshold. These institutions offer strong faculty, modern infrastructure, active placement cells, and widely recognized degrees:

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Sir should I do btech central university of jharkhand, panducherry, Karnataka or doing btech in my state private colleges is better
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Recommendation: The five colleges recommended in order of preference, based on reputation, placement rigor, faculty excellence, and proven corporate acceptance, are: College of Engineering Pune (COEP Technological University), PICT Pune, Vishwakarma Institute of Technology (VIT Pune), MIT World Peace University (MIT-WPU), and VIIT Pune. These choices optimize learning, employability, and peer environment for a flourishing tech career. All the BEST for a Prosperous Future!

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