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Photo: iStock
Photo: iStock

Plan your finances in a way that you can avoid taking personal loan

You should be immediately clearing off your credit card loan. Credit card loans are one of the most expensive ways of borrowing moneys

I had enrolled in a coaching institute with a 12- month EMI plan about six months ago. I didn’t have enough cash at that point of time. However, I am financially stable now to pay off all my debts. Is it possible to clear my pending EMIs all at once? I had taken EMI on my SBI card.

—Swagata

It is strongly recommended that you plan your finances in such a manner that the need of personal loans, credit card loans is avoided. But in your case, it is assumed that you could not avoid the same and the need of loan was not for a payment of any goods or services which are in the nature of avoidable expenses but was done as a long-term investment in yourself, i.e., coaching classes. 

And yes, you should be immediately clearing off your credit card loan. Credit card loans are one of the most expensive ways of borrowing money. It is the ease of borrowing as well as repayment which becomes an incentive for the borrower and this advantage is taken by credit card companies. In your case, as you have the funds, it becomes an easy decision to do a loan prepayment. And even if there was a scenario, where you could not pay the funds from your own sources, it is always good to re-evaluate the cost of borrowing from other means, i.e. personal loans, loan against assets and check which offers a lower interest rate of borrowing along with the flexibility of prepayment.

I have been investing 5,000 each month in HDFC Top 200 Growth for the last three years and 2,500 every month in Tata PE Equity. I want to make an additional investment of 3,000 per month from next year. Which fund should I look for to get good returns in the long run. Also, please suggest a fund where I should invest 1 lakh as fixed deposit for 10 years.

—Rajib

It is assumed that you have a long-term investment horizon as well as the risk appetite as your exposure to investments are all in equity asset classes. The additional monthly investment also is meant for long term and you are targeting high returns so you can consider investing in equity schemes. You already have an exposure in large-cap and value schemes. You can consider a multi-cap or even mid-cap strategy. In the multi-cap strategy, funds like Mirae Asset India Equity and Kotak Standard Multi Cap funds are good options. In the mid-cap segment, L&T Mid Cap and Axis Mid Cap are consistent performers. 

Surya Bhatia is managing partner of Asset Managers. Queries and views at mintmoney@livemint.com

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