By Chaitali Dutta
l My daughter is going to go to the UK for higher education and will return after four years. Should I take an education loan from India or the UK?—Prashant Nair
For Indians going abroad for studies, the Section 80E benefit applies to both loans taken in INR in India as well as loans in foreign currency taken abroad. We usually suggest taking a loan abroad if the student plans to work abroad as well. Then the income will also be in foreign currency, and the loan can be paid off in the same currency.
l I have some fixed deposits which are yielding around 6%. My home loan interest rate is 8.5%. Should I prepay a part of my home loan from my fixed deposits to reduce the total outgo?—Ashutosh Sharma
Yes, the two options in front of you are either to pay off part of the loan with funds that are growing at a lower rate than your home loan. Alternatively, look for options to grow your funds at a higher rate than 8.5%. Also check that your loan rate is linked to repo. With the repo rate coming down, the home loan interest rate should not be as high as 8.5%.
l If I take a home renovation loan, do I have to give proof of the end use of the money?—Aevind Tayal
Yes, since home loan interest rates are lower than, say, a personal loan (where end usage is not a criterion), the bank will usually ask for proof of the money spent.
l My credit card outstanding is around Rs 3 lakh. How can I convert the amount into EMI?—Sudip Kumar
The credit card company will help you arrive at an EMI. Please call them to understand the amount they are suggesting. However, please understand that the interest keeps on ticking even as you make regular EMI payments going forward.
l Last year, I had taken a personal loan of Rs 5 lakh. If I prepay the amount, the lender will put a 3% penalty on the amount. What should I do?—Gautam Gupta
Check with your lender if the charge is exempt if the prepayment amount is lower than the full outstanding balance. Read the sanction letter carefully to check all the prepayment clauses mentioned. Calculate the amount of interest you are paying annually on this loan. If the penalty amount is less than 25% of the interest payable, then you should go ahead and close the loan.
The writer is founder, AZUKE Personal Finance Advisory. Send your queries to fepersonalfinance@expressindia.com