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Ramalingam Kalirajan |10874 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 21, 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 - Aug 19, 2025Hindi

I have a monthly salary of 1 lakh rupees. Have a home laon of 43 lakh for period of 20 yrs bought in 2022. I pay emi of 33000 towards it. Credit card - 80k debt Personal loan 2 lakh debt Have a mutual fund of 10000 as investment. How can i pay off my home loan in 5 yrs to become debt free. I also want to accumulate 1cr in either 5 or 10yrs. How should i plan my investment. Kindly guide

Ans: You have taken a strong step by asking this question at the right time. Many people delay this thinking, but your clarity for debt-free life and wealth creation is highly appreciable. With a salary of Rs. 1 lakh, existing debts, and your target of Rs. 1 crore in 5–10 years, a structured roadmap is possible. I will explain step by step from a 360-degree angle.

» Current Financial Picture

Monthly salary is Rs. 1 lakh.

Home loan outstanding is Rs. 43 lakh, started in 2022, 20-year term.

EMI is Rs. 33,000 every month.

Credit card debt is Rs. 80,000.

Personal loan outstanding is Rs. 2 lakh.

Mutual fund investment is Rs. 10,000.

Desire is to repay home loan within 5 years and accumulate Rs. 1 crore within 5–10 years.

This shows you already carry high debt. But at the same time, your income gives flexibility. With proper allocation, your dream is achievable.

» Priority Order of Debt Clearance

Credit card debt should be closed first. It has the highest interest.

Personal loan is second. Interest is also very high.

Home loan is last. It has the lowest rate among the three.

If you try to close the home loan first without clearing other debts, you will lose more in interest.

Therefore, first build strategy for small debts, then for home loan.

» Strategy for Credit Card and Personal Loan

Allocate Rs. 50,000 per month for debt clearance.

Within 6 months, credit card of Rs. 80,000 can be fully closed.

In the next 5 months, Rs. 2 lakh personal loan can also be fully closed.

Within 12 months, you will be free from both high-cost debts.

This will release cash flow for more investments later.

» Home Loan Payoff Plan

Your EMI is Rs. 33,000. For a 43 lakh loan, 20 years, it will take long.

To close within 5 years, you need extra prepayments.

Once credit card and personal loan are cleared, you can redirect Rs. 50,000 extra monthly.

So EMI Rs. 33,000 + Prepayment Rs. 50,000 = Rs. 83,000 towards loan.

This will reduce loan tenure drastically.

In about 5–6 years, the loan can be fully closed.

Prepayment should be done yearly in lumpsum to reduce principal quickly.

By following this, you can become debt-free before 2028.

» Balancing Loan Closure and Wealth Creation

If you only focus on loan, wealth building will slow.

If you only focus on wealth, debt will eat away returns.

Balance is needed.

First year: only debt clearance (credit card + personal loan).

From second year: split between loan prepayment and investment.

Example: Rs. 50,000 extra cash flow – Rs. 25,000 for prepayment, Rs. 25,000 for investments.

This balance will help both goals.

» Target of Rs. 1 Crore Corpus

You want Rs. 1 crore in 5 or 10 years.

With home loan repayment and other debts, 5 years may be difficult.

In 10 years, it is achievable.

With Rs. 30,000–40,000 investment monthly in good equity-oriented mutual funds, you can reach close to Rs. 1 crore in 10 years.

Equity has higher growth potential compared to traditional deposits.

Avoid index funds because they copy the market and give average returns only.

Actively managed mutual funds, guided by a Certified Financial Planner, can deliver better returns.

Direct funds may seem cheaper but lack expert handholding. Regular funds through a CFP or MFD ensure proper guidance, review, and disciplined investment.

» Steps for Investment Allocation

After one year, when debts are cleared, start Rs. 25,000–30,000 SIP in diversified mutual funds.

Increase this amount every year when your income rises.

Even during home loan prepayment, continue SIP without break.

This dual approach will reduce loan and also grow wealth.

Equity SIP works best with time, so 10 years is better window.

» Risk and Safety Balance

Do not put all money in equity.

Maintain some part in debt mutual funds or recurring deposits for stability.

Emergency fund of 6 months expenses should be created first.

This will prevent fresh loans in future.

Life insurance cover of at least 15–20 times annual salary is needed.

Health insurance for self and family is also essential.

Without these protections, investment plan can collapse due to emergencies.

» Lifestyle and Expense Control

Review your monthly expenses.

Even 10% savings from lifestyle cutbacks can release Rs. 8,000–10,000.

This extra amount can be invested or used for prepayment.

Avoid fresh loans unless unavoidable.

Control on credit card usage is critical.

» Tax Efficiency Planning

Equity mutual funds give long-term benefit if held beyond one year.

New rule: LTCG above Rs. 1.25 lakh taxed at 12.5%.

STCG taxed at 20%.

Debt funds taxed as per income slab.

Therefore, equity allocation should be higher for long-term goals.

Use debt products mainly for emergency and near-term needs.

» Realistic Timeline for Your Goals

Debt-free in 5–6 years is realistic, if disciplined.

Rs. 1 crore in 5 years is difficult, but in 10 years is achievable.

Your focus should be to first secure base by clearing high-cost debt.

Then balance home loan prepayment with equity investment.

With 10 years horizon, wealth creation becomes smoother.

» Psychological Benefits of the Plan

Clearing credit card and personal loan within 1 year will reduce stress.

Home loan closure within 5–6 years will give complete peace.

Parallel mutual fund investment will give confidence of wealth building.

This dual track of loan reduction and investment growth creates both relief and hope.

» Possible Challenges to Watch

Job stability is important for your plan.

Any income disruption will delay both loan and investments.

Market volatility in equity will happen. But long-term holding reduces risk.

Inflation will reduce purchasing power, so wealth building is critical.

Discipline in spending and avoiding new loans is the biggest challenge.

» Finally
Your path to debt-free life and Rs. 1 crore wealth is possible. First, clear credit card and personal loan. Next, prepay home loan while continuing SIPs. Split your cash flow between prepayment and investments from second year. With consistent discipline, 10 years is enough to reach the corpus target. At the same time, you will be fully debt-free within 5–6 years. Protect yourself with insurance and emergency funds. This 360-degree approach will secure both your present and your future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

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