Should I payoff my Education Loan and the impact on my Cibil

[federer.reddevil]

So I took an education loan for my MCA in 2019 for 2.25L however needed to use only 1.85L as the rest got saved due to Covid (1 year hostel fees) Started paying it back in Oct 2021.

Now 1.4L remaining monthly EMI is 3k last month and still there for I think 64 months. Last month a FD of mine matured for approximately the same amount I need it for VISA purpose in my bank till Feb end.

Once that is complete should I use that amount to pay off this 1.4L loan and then invest the monthly 3k in SIP or should I continue by paying this 3k monthly EMI

I know if I pay it as SIP for 60 months then the principal itself will be 1.8L and with interest will come easily to 2.1 - 2.2L which will more than make up if I put this in FD at 9.5% by continuing with the loan

I dont want to make a lumpsum to Mutual Fund as it would require timing the market and fund and over a 5 year period even if we perfectly time it difference between 1.4L lumpsum and 3k for 60 months will be very less

However the most important point I am worried about is what will happen if I preclose the loan with regards to Cibil whether it will take a hit and if yes how big. Also will it affect me if I take a loan in future especially for home loan

 

[Ash8]

On the contrary, cibil should be least of the concern here. You can pay off the loan, cibil mostly wouldn't take much hit and it would recover easily even if it takes a hit. And this wouldn't be a concern when applying for home loan as well, you will get your home loan.

There should just be one focus in your case - if you can extract more return on the money rather than prepaying the loan then keep the loan. If the interest is on the higher side(I am not sure how much is interest rate for education loan) then close the loan immediately.

One more thing is if you are earning very well that this loan amount and EMI feels very small then just prepay and get out of it.

 

[amitagl27]

I had an education loan as well back in 2010. After getting the job, first thing I did was to pay-off my education loan as soon as possible. 3k per month might feel very less, but the peace of mind you'll have after paying off will be great. (as in my case it was a huge burden off my shoulders).

Additionally, since you are not into Mutual Funds and market-based returns, it would be best to close the loan looking at the financial aspect of it. Since returns are not that great on FD.

It shouldn't impact your CIBIL much and at the same time you can build CIBIL score by other means.

 

[federer.reddevil]

On the contrary, cibil should be least of the concern here. You can pay off the loan, cibil mostly wouldn't take much hit and it would recover easily even if it takes a hit. And this wouldn't be a concern when applying for home loan as well, you will get your home loan.

There should just be one focus in your case - if you can extract more return on the money rather than prepaying the loan then keep the loan. If the interest is on the higher side(I am not sure how much is interest rate for education loan) then close the loan immediately.

One more thing is if you are earning very well that this loan amount and EMI feels very small then just prepay and get out of it.

No actually based on the analysis if I time the market well and do a lumpsum of 1.4L for 5 years at 15% will be around 2.9L whereas doing it at 3000rs SIP my EMI amount for 60 months will come to 2.69L

However there is a big if on me timing the market with a lumpsum payment

The interest is now at 10.75% so on higher side for Education Loan

I had an education loan as well back in 2010. After getting the job, first thing I did was to pay-off my education loan as soon as possible. 3k per month might feel very less, but the peace of mind you'll have after paying off will be great. (as in my case it was a huge burden off my shoulders).

Additionally, since you are not into Mutual Funds and market-based returns, it would be best to close the loan looking at the financial aspect of it. Since returns are not that great on FD.

It shouldn't impact your CIBIL much and at the same time you can build CIBIL score by other means.

Yea with FD i will get 2.24L