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Ramalingam Kalirajan |8940 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 15, 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

Asked by Anonymous - May 14, 2025

Dear Sir, My monthly income is 2.5 lac, savings include three land parcels (1.37 cr), mutual funds (43 lac), LIC (12 lac), and stocks worth 64 lac. I am not including PF in my saving. My liabilities include home loan emi 60k per month (58 lac outstanding) and emi of personal loan 40k per month (16 lac outstanding). Please note that i have not included my ancestral property (aaprox 4cr) back in my home town and my current house (1.2cr) in delhi as my investment and am not intended to sell them. I am doin SIP of 50k month in mutual fund as well. Please suggest if i should prepay my loans (14 years remaining in both) my disposing off my real estate assets, or by selling my mutual funds and stocks, or should continue to pay the emi.. I am a 39 year old workin in private sector.

Ans: You have done a fine job building your finances.
A monthly income of Rs. 2.5 lakh offers good scope to plan further.
Your net worth is strong. Your clarity about assets is useful.

Let’s now evaluate your loans and investments fully.

We will see if loan prepayment is better or continuing EMI suits you more.

We will give you a simple, practical, and 360-degree answer.

Loan Details – A Quick Understanding
Your home loan has Rs. 58 lakh balance. EMI is Rs. 60,000 monthly.

Your personal loan has Rs. 16 lakh balance. EMI is Rs. 40,000 monthly.

Both loans have 14 years left.

Your total EMI is Rs. 1 lakh monthly, which is 40% of income.

This EMI load is still manageable, but can limit your savings.

Asset Overview – You Hold Valuable Assets
Three land parcels – total value is around Rs. 1.37 crore.

Mutual funds – Rs. 43 lakh. SIP of Rs. 50,000 is ongoing.

Stocks – Rs. 64 lakh. Good value and can grow further.

LIC – Rs. 12 lakh. This can be evaluated separately.

House in Delhi – Rs. 1.2 crore (not meant for selling).

Ancestral property – Rs. 4 crore (not meant for selling).

EPF not included in current asset count.

Income Stability – Key Strength
You are working in the private sector at age 39.

You likely have 20+ years of earning life ahead.

Income of Rs. 2.5 lakh monthly shows strong earning power.

This gives you room to act on a long-term plan.

Approach to Loan Prepayment – Thoughtful Steps
Let’s now assess your prepayment options clearly.

Should you prepay home and personal loans?
And if yes, what is the best way to do it?

We’ll check each option with clarity and purpose.

Option 1: Use Mutual Funds and Stocks to Prepay
You hold Rs. 1.07 crore across mutual funds and stocks.

Selling this can close your loans fully.

But this step ends future compounding.

Equity and mutual funds grow better over time.

Selling now reduces future wealth potential.

Also, mutual funds sold now can attract capital gain tax.

LTCG on equity funds above Rs. 1.25 lakh is taxed at 12.5%.

STCG is taxed at 20%.

Selling in a hurry may create tax burden.

Stocks too, if held long term, may grow better than loan savings.

Do not liquidate full equity portfolio unless under financial pressure.

Option 2: Use Real Estate (Land Parcels) to Prepay
Land parcels are worth Rs. 1.37 crore.

Land does not give monthly returns.

It has holding cost and liquidity issues.

Selling land and closing personal loan is a good move.

Personal loan has higher interest than home loan.

Prepaying personal loan gives instant relief in cash flow.

This saves you Rs. 40,000 per month.

After that, you can partly reduce home loan as well.

This will reduce total interest over 14 years.

Real estate is not ideal for wealth building.

Land sale can be better used to reduce high-cost loans.

Option 3: Continue Paying EMI and Keep Assets Untouched
Current EMI is Rs. 1 lakh monthly.

You save Rs. 50,000 in SIP and likely save more outside that.

If you continue EMIs, equity portfolio will grow faster.

In the long run, equity can give higher return than loan rate.

But, you carry high EMI stress for next 14 years.

You stay exposed to job risk in private sector.

Reducing loan now gives more future comfort.

Balanced and Smart Approach – Best for Your Case
Now let us give a 360-degree mix of the above.

This balanced path protects growth and reduces loan burden.

First, sell one land parcel.

Use this to close the full personal loan.

Personal loan has high interest. Closing it gives immediate benefit.

EMI burden drops from Rs. 1 lakh to Rs. 60,000 monthly.

You save Rs. 40,000 monthly, which can now go to investments.

Second, part-prepay the home loan using remaining land money.

Don’t close full loan, just reduce tenure or EMI.

This cuts interest and lowers future outgo.

You also stay eligible for home loan tax benefits.

Third, continue equity investments without selling.

Let mutual funds and stocks stay invested.

They can grow well over next 10–15 years.

Fourth, review your LIC policies.

If they are traditional or ULIPs, returns are low.

Surrender them if lock-in is over.

Reinvest proceeds in mutual funds.

Equity funds give better compounding over time.

Fifth, don’t touch the house or ancestral property.

You are wise to keep them outside this plan.

They are emotional and security assets. Not financial investments.

Use Regular Funds via CFP – Not Direct
Direct mutual funds look cheaper but give no support.

Wrong fund choice or timing can harm you.

You already have a large equity portfolio.

Without guidance, portfolio can become risky or unbalanced.

Regular funds, through Certified Financial Planner, give expert guidance.

You get help with rebalancing, tax planning, and goal alignment.

You save more in long term with right direction.

Other Important Steps You Can Take
Build or review your emergency fund.

Keep 6–9 months of expenses in liquid mutual fund.

Maintain good health and life insurance.

Term plan should be 10–15 times your annual income.

Health plan should cover you and family.

If any insurance is bundled with investment, review it critically.

Review your SIP portfolio every year.

Use asset allocation based on age and risk comfort.

Consider increasing SIPs by 5–10% yearly.

Finally
You are in a strong financial position.

You are earning well and saving consistently.

Your asset base is rich and diverse.

But your EMI load is affecting your monthly surplus.

You also carry high-cost personal loan.

Avoid touching equity investments for prepayment.

Instead, sell land parcels and close personal loan.

Then reduce some home loan principal also.

This improves monthly cash flow and reduces future interest.

Keep investing through mutual funds regularly.

Don’t shift to direct funds. Stay with regular funds via CFP.

Review your LIC policies and shift to equity if possible.

Build a clear financial roadmap for 15–20 years.

Take help from a Certified Financial Planner to stay on course.

This balanced strategy gives you growth, liquidity, and peace.

You are not late. You are well-placed to grow further.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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

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