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LoansJagat Team

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27 Jun 2025

End-of-Financial-Year Loan Planning Guide for 2025

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Planning your loans before the financial year ends helps you stay in control. This blog explains how to manage debts, save tax, and avoid unnecessary borrowing in 2025.

 

1. Review and Consolidate Existing Loans

 

Reviewing and consolidating loans at the end of the financial year is wise. It helps manage debt better. By combining loans, you can reduce interest and simplify payments. This approach improves financial health.

 

Shivam, a 28-year-old from Bengaluru, had multiple debts. He decided to consolidate them.

Loan Type

Amount 

Interest Rate

Monthly EMI 

Tenure (Months)

Personal Loan

₹2,00,000

14%

₹4,800

48

Credit Card 1

₹50,000

24%

₹2,500

24

Credit Card 2

₹30,000

20%

₹1,800

18

Total

₹2,80,000

 

₹9,100

 

 

Shivam took a personal loan of ₹2,80,000 at 11% interest for 48 months. His new EMI was ₹7,300. This saved him ₹1,800 monthly. He now manages one EMI instead of three. This consolidation reduced his financial stress.

 

2. Leverage Tax Benefits on Loans

 

In India, loans can help reduce your income tax. Home and education loans offer tax benefits under the old tax regime.

 

Home Loan Benefits:

 

Section 80C: Deduct up to ₹1,50,000 on principal repayment.

 

Section 24(b): Deduct up to ₹2,00,000 on interest for self-occupied homes.

 

Section 80EEA: Additional ₹1,50,000 deduction for affordable housing loans sanctioned before 31 March 2025.

 

Education Loan Benefits:

 

Section 80E: Deduct full interest paid on education loans for up to 8 years.

 

Example: Mayank's Tax Savings

Loan Type

Amount Paid

Section

Deduction 

Home Loan Principal

₹1,50,000

80C

₹1,50,000

Home Loan Interest

₹2,00,000

24(b)

₹2,00,000

Education Loan Interest

₹1,50,000

80E

₹1,50,000

Total Deduction

 

 

₹5,00,000

 

Mayank can claim ₹5,00,000 in deductions, reducing his taxable income and saving on taxes. Using loan-related tax benefits wisely can lead to significant savings.

 

3. Evaluate Refinancing Opportunities

 

Refinancing a loan means replacing an old loan with a new one. This can help reduce interest rates, lower EMIs, or shorten the loan tenure. It is useful when market rates fall or your credit score improves. In 2025, the RBI cut the repo rate to 6.25%, leading to lower loan rates. This makes refinancing a smart option.

 

Let us see an example of Karan:

Details

Before Refinancing

After Refinancing

Loan Amount

₹50,00,000

₹50,00,000

Interest Rate

8.5%

7%

Tenure

20 years

20 years

EMI

₹43,391

₹38,765

Total Interest Paid

₹54,13,840 

₹43,03,600

Total Savings

₹11,10,240

 

Karan refinanced his loan at a lower rate. His EMI reduced by ₹4,626. Over 20 years, he saved over ₹11,00,000 in interest. Refinancing helped him manage his finances better.

 

4. Avoid Unnecessary New Debt

 

Avoiding new debt is key to financial health. Taking loans for non-essential items can lead to long-term financial strain. High-interest debts, like credit cards, can quickly accumulate, making repayment difficult. It's advisable to save for purchases instead of borrowing. 

 

This approach helps in maintaining a balanced budget and reduces financial stress. Planning and prioritising needs over wants can prevent unnecessary borrowing. Establishing an emergency fund can also provide a safety net, reducing the need for sudden loans.

 

Example: Nitin's Financial Scenario

Item

Cost 

Payment Method

Interest Rate

Total Cost

Smartphone

₹25,000

EMI (12 months)

15%

₹28,750

Vacation

₹50,000

Credit Card

18%

₹59,000

Emergency Medical Expense

₹20,000

Personal Loan

12%

₹22,400

Total

₹95,000

 

 

₹1,10,150

 

Nitin's unnecessary debts increased his expenses by ₹15,150 due to interest. By avoiding non-essential loans, he could have saved this amount.

 

5. Plan for Upcoming Financial Commitments

 

Planning for upcoming financial commitments is key to staying debt-free. It helps you prepare for big expenses and avoid last-minute loans. Start by listing all known future costs. These may include school fees, home repairs, or family events. Next, estimate the amount needed and the due date. Then, divide the cost by the number of months left to save. 

 

This gives you a monthly saving target. Also, consider setting up an emergency fund. This fund can cover unexpected expenses like medical bills. By planning, you can manage your money better and reduce stress. It also helps you avoid high-interest loans. Remember, small savings each month can add up to a big amount. Start early and stay consistent.

 

Example: Nishant’s Financial Plan

Commitment

Amount Needed

Month Lrft

Monthly Saving

College Fees (June 2025)

₹1,20,000

₹20,000

Sister’s Wedding (Dec 2025)

₹1,80,000

12

₹15,000

Emergency Fund

₹60,000

12

₹5,000

Total Monthly Saving

 

 

₹40,000

 

Nishant earns ₹80,000 per month. He saves ₹40,000 monthly to meet these goals. This plan helps him avoid loans and stay financially secure.

 

Conclusion

 

Plan loans wisely before the financial year ends. Consolidate debts, check for tax benefits, and avoid unnecessary borrowing. Save for future needs to stay financially secure. Keep it simple and smart.

 

FAQs

 

1. Should I combine my loans at year-end?

Yes, it can lower your interest and make payments easier.

 

2. Do loans help save tax?

Only some loans, like home or education loans, give tax benefits.

 

3. Is now a good time to refinance?

Yes, if interest rates have dropped or your credit score has improved.

 

4. Should I take new loans for wants?

No, avoid loans for non-essentials to stay debt-free.

 

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LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?

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