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POSTED BY ON November 10, 2010 11:21 pm COMMENTS (12)
Hi All,
Iam a finance illeterate. Iam looking for a advice. I have no savings but a home loan for 20yrs approximately 30k per month. Recently i sold a property got 20lks. I am in a dilemma whether to close the loan or make investments to money grow . seeking advice.
Thanks in advance,
sada
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Shashank,
I haven’t made any progress on decision yet. I am looking forward for your suggestion.
Thanks and Regrds
Sada
Sada,
Have you taken any decision on the above dilemma yet? I have a solution to suggest if you haven’t committed that money elsewhere.
Hi Venshu ,
Now that you have mentioned my name, I have to come up with some innovative and effective solution !!!!
Sada,
If I were you, I would repay the home loan in full and start investing the Rs. 30K in good mutual funds every month. I am a firm believer of living life without credit and this is my personal opinion.
A lot of people might say that one can invest the Rs. 20 Lakhs in good instruments, earn a good return of say 15%+ and continue paying the loan at around 9 or 10% interest.
You should do what you are comfortable doing and what you believe is right. There is nothing absolute about taking a call on the subject matter. What works for me might not work for you!!
Venshu,
Thanks for advice. But problem is full loan repaying is not possible since the loan amount is 26lks. Partial closing is reducing tenure not EMI.
Sada
Classic case for a Financial Planner to analyze and advice – Mr. Shashank Kashettiwar where art thou??!!
MoneySavingsHelp,
Thank you. But partial repaying only reducing tenure not EMI.
Sada
Ok, In that case, I suggest to meet with bank manager and try to bargain the loan re-payment conditions. Pay your whole loan as early as possible and start your fresh investments. It’s never too late to start.
Hope it will help you.
I suggest to repay 50% outstanding loan and decrease your EMI. In this way, you can invest balance amount for growth and also you’ll save extra every month to invest further.
Hope it will help you.
As an additional info, the Smart Home Loan (HSBC) would be very useful in such cases. The amount is liquid and that also earns the same rate as your loan. I control my interest part and keep it around 3 lakh (1.5 each for me and my wife) my moving funds in and out.
Few other banks have these loans in different names and they are .5% more than the regular loans but they dont market such loans much.
Sada
If you have paid your loan for couple of years only till now , closing the loan might not make much sense as you will be paying very little than the actual cost , because till now you have paid only interest .
You can continue the loan provided you can put this 20 lacs to better use and your future cash flows are going to be strong and expected to be stable .
Home prices would increase over time , so even if you are in deep mess later, you will have this 20 lacs invested and growing and home prices appreciated .
@Rakesh
While your point of “closing your debt” is true in general like personal loans , car loans , it might not suit home loans or educations loans which are for something which increases value in your life overtime . Overall its a personal issue where if a person is more comfortable with closing the loan and feel burden free, he/she should go for it .
Manish
Thankyou Manish,
I am thinking in the same line. But as i wrote earlier, iam a finance illiterate.Will u suggest options where to invest for a long period in different baskets. Moderate risk is o.k.
Sada
It is always better to clear your liabilities, If i were you i would close all if not pay most of my home loan.
Rakesh