I want to clear two personal loans and secure home loan within 6 months on Rs 59K monthly salary. How should I plan?

My name is Veer, and I work in the private sector, earning Rs 59,000 in hand, and have two personal loans of Rs 3.6 lakh pending, with EMIs of Rs 9,200 till January 2028, and another with EMI of Rs 5,500 for two years more. I am planning to switch jobs in two months and would be easily able to get a raise and have a salary of Rs 75,000. My wife and I are planning to have a baby in 2025. I have no savings and have to pay rent of Rs 11,000. I have to take a home loan in the coming six months...my age is 29, and I have a sister aged 18. My mother is a homemaker. My father is 62 years old and has a shop. I will need to support him as well from May 2024. I will have to pay Rs 8,500 for an SIP which my dad started for me. Please help me to end these loans. How should I do it?

Reply by Adhil Shetty, CEO, BankBazaar.com

Your first step should be to straighten your finances. You have four requirements: to clear your existing loans, buy a house, support your family, and start saving.

To start with, once your EMIs and rent is paid, you have roughly Rs 33,000 in hand. Understand how much of this you would be able to use to prepay your personal loans. One of your options could be to consolidate your existing loans into a less expensive personal loan with a shorter tenor so that you can pay them off quickly.

Next, focus on building a small emergency fund. It is essential to have some savings to fall back on in case of emergencies so that you don’t have to take a loan. Start a recurring deposit where your salary is debited for the deposit within the first few days after it arrives. Once you have a savings habit in place, expand to other instruments, such as mutual funds.

Next, calculate your liabilities towards your family and see how much you are left with. Calculate if you have enough to take on a home loan. Currently, based on your income, you would be eligible for a home loan of around Rs 25-28 lakh. The monthly EMI would be around Rs 23,000.

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However, buying a house involves out-of-pocket expenses. The loan would cover at most 80-90% of the cost of the house, and there would be registration and stamp duty charges to consider. You should be able to foot roughly 20-30% of the cost of the house from your own savings. A home loan alone will not be able to help. Calculate how you can put together this amount. Also bear in mind that you will need to wait for at least 6 months after switching your job before you can apply for a home loan.

As of now, your best course of action is to consolidate and pay your loans in the next couple of years, start saving, and then invest in a house of your own in the next few years so that you do not take on more liabilities than what you can deal with.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)