Save Big on Your Education Loan: Expert Tips from Tejas Joshi

Are you paying off an education loan and looking for ways to reduce the financial burden? Tejas Joshi, a finance influencer known for his insightful money-saving tips, has shared a powerful strategy to help you save on education loan interest. By investing a portion of your monthly EMI in mutual funds, you can build a fund that could pay off your loan early, reducing the number of EMIs and saving you a substantial amount in the long run. Here's a breakdown of this smart hack.

1. Understanding the Education Loan Strategy

Let's take an example to illustrate this approach. Suppose Vijay, a student, takes an education loan of ₹25 lakh at a 10% annual interest rate over a 10-year period. His monthly EMI would be approximately ₹33,038. According to Tejas, by investing just 10% of this EMI, or ₹3,304 per month, in mutual funds with an expected return of 12%, Vijay can significantly reduce his loan term and save on interest.

2. Invest 10% of Your EMI in Mutual Funds

Tejas recommends starting with a Systematic Investment Plan (SIP) in an index mutual fund, which typically offers returns around 12%. By allocating just 10% of your EMI to this investment, you are essentially building a parallel fund. Over time, as your investment grows, it will eventually surpass your remaining loan balance, allowing you to pay off the loan early. In Vijay's case, he can repay the loan by the 102nd month, saving 18 EMIs valued at ₹5,94,678.

3. Doubling Your Savings with a 100% EMI Investment

For those who can invest more aggressively, Tejas suggests an alternative strategy: investing an amount equivalent to the full EMI. If Vijay invested ₹33,038 (100% of his EMI) each month, his investment would exceed his loan balance by the 45th month, allowing him to pay off the loan significantly sooner. This would save him 75 EMIs, totaling around ₹25 lakh—a substantial savings.

4. The Power of Compound Interest

The key to this strategy is compound interest, which allows your investments to grow faster over time. By starting early and contributing regularly, even small investments can grow significantly, helping you build a fund that could eliminate your education loan much sooner than expected.

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Tejas Joshi's approach to managing education loans is an effective way to reduce your financial load while building wealth. By investing a portion of your EMI in a mutual fund, you can shorten your loan term and save on interest, making education loan repayment more manageable and financially rewarding.