Your Queries – Loans: Make part-payments on home loan as early as possible
By Chaitali Dutta
If I have to do part payment of my home loan, should I do it in the first week of the month to reduce the simple interest payout?
— Akash Thakur
Most of the home loans are on a daily reducing balance, so it would not matter which date you chose for part payment. The earliest the better. However, if your home loan is on a monthly reducing balance, then better to pay it before the 7th of the month.
Last year, I had availed a top-up loan. Now, I have got some amount from the proceeds of an investment. Should I use it to prepay a part of the loan?
— PR Sagar
If the amount you received is surplus funds that you feel that if invested, will fetch a lower rate of return than the interest charged on your home loan, then go ahead and reduce your loan liability.
Is there any age limit for a parent to get an education loan? I will retire next year, and my son needs funds to pursue an MBA in Ireland. Can I get a loan which I will repay from rental income I will earn after retirement?
— Pradeep Singh
An education loan repayment is the responsibility of the student and not the co-applicant, the parent. As an earning parent, if you would like to pay the simple interest accrues on the education loan, go ahead. However, once you retire, let your son take care of the interest and principal repayment from his own earnings.
How do I get a loan against my deposits and other securities which I do not want to break?
— Alok Verma
The process would be different for each security. In case you have a bank fixed deposit, typically the same bank will grant you an overdraft facility against that FD. The interest rate would be higher than the FD rate and is the earning for the bank. If you have mutual funds, you may approach your banker to provide you a loan against the units. Here the margin would be higher and you may get only 40% or 50% of the value of the MFs. If you have a bond portfolio, the same facility would be offered to you at a lower margin, as the returns on bonds are fixed.
The writer is founder, AZUKE Personal Finance Advisory (www.azukefinance.com). Send your queries to fepersonalfinance@expressindia.com.