Laddering of loans can help you be debt-free

Loans give you the ability to live tomorrow's lifestyle today. In my father's generation, people would save for years to buy an asset such as a car or a house. Today, because of readily available loans, you can buy an expensive asset such as a house, jewellery or vehicle within a few years of starting off your career.  For most people, home is one of the biggest assets in their portfolio. There is no harm in availing a loan, provided the EMI you pay over the year forms less than 50% of your annual income, you have job security and you can finance the loan comfortably. However, for most people, loan becomes a psychological burden until it is cleared. Does it make sense to use existing assets to reduce or close a loan or should you continue a loan to tenure? You should decide on continuing or closing your loans based on interest rate, outstanding loan and tax benefits.  Let's say your outstanding home loan is Rs50 lakh, at an ongoing interest rate of 10%

This article was originally published on October 08, 2018.