Your questions – Loans: Make mortgage installments as soon as possible

By Chaitali Dutta

If I have to pay part of my home loan, do I have to do it the first week of the month to reduce the simple interest payment?
— Akash Thakur

Most home loans are on a daily declining balance, so it doesn’t matter what date you choose for partial payment. The earliest would be best. However, if your home loan is on a monthly declining balance, it is better to pay it off before the 7th of the month.

Last year, I had benefited from an additional loan. Now I have received a certain amount of proceeds from an investment. Should I use it to prepay part of the loan?
— PR Sagar

If the amount you received is excess funds that you think will earn a lower rate of return than the interest charged on your home loan, then go ahead and reduce your debt.

Is there an age limit for a parent to get a student loan? I will be retiring next year and my son needs money to pursue an MBA in Ireland. Can I get a loan that I will repay from the rental income I will earn after retirement?
—Pradeep Singh

Repayment of a student loan is the responsibility of the student and not of the co-applicant, the parent. As a working parent, if you want to pay the accrued simple interest on the student loan, go ahead. However, once retired, let your son take care of the interest and principal repayments on his own income.

How can I get a loan against my deposits and other securities that I don’t want to break?
—Alok Verma

The process would be different for each title. In case you have a bank fixed deposit, usually the same bank will grant you an overdraft facility against this FD. The interest rate would be higher than the FD rate and is the gain for the bank. If you have mutual funds, you can ask your banker to lend you the shares. Here the margin would be higher and you might only get 40% or 50% of the MF value. If you have a bond portfolio, the same facility would be offered to you with a lower spread, as bond yields are fixed.

The author is the founder, AZUKE Personal Finance Advisory (www.azukefinance.com). Send your questions to [email protected]

Garland K. Long