IIM graduate says he paid off his MBA loan in 8 years instead of 3: ‘My smartest financial decision’
IIM graduate says he paid off his MBA loan in 8 years instead of 3: ‘My smartest financial decision’
One of the primary factors influencing his decision to avoid rapid repayment was the tax benefits that many people tend to ignore.
An MBA graduate shared his reasoning on Reddit for choosing not to pay off his education loan as quickly as he could. The alumnus of the Indian Institute of Management (IIM) Bangalore explained that despite his initial urge to settle the loan rapidly, he opted for a different approach.
He shared that after completing his studies at IIM Bangalore, he took the time to conduct a financial analysis typical of an MBA graduate and concluded that hurrying to pay off his loan wasn’t the most advantageous choice.One of the primary factors influencing his decision to avoid rapid repayment was the tax benefits that many people tend to ignore.
An MBA graduate shared his reasoning on Reddit for choosing not to pay off his education loan as quickly as he could. The alumnus of the Indian Institute of Management (IIM) Bangalore explained that despite his initial urge to settle the loan rapidly, he opted for a different approach.
He shared that after completing his studies at IIM Bangalore, he took the time to conduct a financial analysis typical of an MBA graduate and concluded that hurrying to pay off his loan wasn’t the most advantageous choice.
Why I Chose to Repay My MBA Loan in 8 Years Instead of 3!
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He highlighted that one of the primary factors influencing his decision to avoid rapid repayment was the tax benefits that many people tend to ignore. According to Section 80E of the Income Tax Act, taxpayers can claim a full tax deduction on the interest paid for a period of up to eight years. He pointed out, “If you clear your loan in two to three years, you lose out on this major saving. Why not use the full window and reduce taxable income?”
In the second point, the Reddit user provided an illustration involving a borrower with a ₹20 lakh loan. With an interest rate of 9%, the original ₹20 lakh principal does not remain unchanged. “By the time you start repayment, it could increase to ₹25-27 lakh because of accumulated interest,” he explained.
He further noted that a significant portion of the interest on the loan is collected by the bank during the initial years. This is due to the fact that the interest portion of the EMI is considerably greater than the principal repayment portion in those early years.
“Instead of throwing all my money into quick repayment, I balanced it with savings and investments. I structured my repayment wisely – ensuring I get tax benefits, and maintain liquidity and investment smartly. And honestly? Best financial decision I made.“Lesson learned: Being debt-free fast sounds good but being financially smart is better,” he adds further.
