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Repaying Loans

Invest regularly in mutual funds to repay an education loan gradually as your investments grow…

I am 24 and earn Rs 20,000 a month. I have taken an education loan of Rs 5 lakh for which repayment starts six months from now. I want to invest now on to be able to repay the loan early, where can I invest?- Shrikanth

The strategy to invest to pay for the education loan is a good idea and as a new investor you should know that when you invest in equity mutual funds, you are right away exposed to market risks. For a new investor, we suggest you consider investing in a balanced fund such as HDFC Prudence or HDFC Balanced fund.

You should invest regularly through systematic investment plans in these funds an amount that you are comfortable to invest after taking into account your monthly living expenses. Moreover, when you start repaying the loan, you should invest only the surplus that you are left with after the EMI payment and your expenses. As your investments grow in the funds that you invest in, from time to time you can prepay some of your loan and reduce your liability.

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