How do you get a personal loan to start a business? If you are already using a personal loan to fund your business, then what is the best way to manage it?

Should you take a personal loan to repay your outstanding credit card dues? If no, then what is the drawback of such a move?

In a chat with readers on May 22, Get Ahead personal finance expert Harsh Roongta answered these and many more queries related to personal loans.

For those of you who missed the chat, here is the transcript.

Part I: How to get a cheap personal loan

MRITUNJAY asked, Hi Harsha, I am planning to take a personal loan upto Rs 1.5 lakhs from HDFC Bank so that I can build a house at my native place. Is it a good move? Please guide me on this matter.

Harsh Roongta answers, You will be better off taking a home loan rather than a personal loan as a home loan is cheaper.

For this purpose, you may have to choose a bank which is active at your native place so that they can do the property verification. If that is not possible or is too difficult, then a personal loan can be taken though it will be quite expensive as compared to a home loan and will also be for a shorter duration. Consequently, your EMI will be much higher.

Anyway, you should scout round for the best deal before finalising your bank. 

sam2 asked, Should I take a personal loan at the end of the financial year for my tax planning and repay in next. Would it be a good decision?

Harsh Roongta answers, Personal loans can be pretty expensive and the repayment charges make them even more so. If the need is for credit for a few weeks, you may be better off by making the investment through your credit card rather than by taking a personal loan.

Mari asked, 1. I have heard that some banks provide personal loans at floating rate of interest. Is that true?

2. What is the best rate for personal loan as on today? Thank you.

Harsh Roongta answers, Most banks provide personal loans on a fixed rate of interest.

Mihir asked, I need Rs 20 lakhs for buying a flat. Since home loan processing takes time, I intend to take a personal loan and when the home loan is sanctioned, I plan to repay the personal loan with it. Is it a good idea? What are its drawbacks?

Harsh Roongta answers, Getting a personal loan of Rs 20 lakhs is not going to be easy unless you disclose a huge amount of income. For getting a quick response on your home loan application, make the banks compete for your loan by using the services of market places like www.apnaloan.com.

Arbab asked, My outstanding bill is for Rs 55,000 on credit card. Please suggest if it is a good idea to take a personal loan and clear all outstandings on my credit card?

Harsh Roongta answers, It is a good idea as long as you are not going to use your credit card for taking up fresh debt. Also, you may have diffculty getting a personal loan if you have already defaulted on your credit card payment.

yogesh asked, Which bank is providing loans at least rate of interest? I am already using ICICI's bank loan, that is, an unsecured overdraft (OD) of Rs 10 lakhs. Can you explain about the prepayment?

Harsh Roongta answers, In an unsecured overdraft situation, there is no such thing as a prepayment. Just pay up the amount and keep the account in positive balance and there will be no charge on you. Also inform the bank well in advance that you do not wish to renew the account, so that the renewal fee is not charged.

yogesh asked, Hello I am Yogesh dealing in Steel. I would like to know if personal loans are useful for running a business or are there other options available?

Harsh Roongta answers, A better option is a loan against security (such as a house/ office/ shop or finacial security such as shares, units, insurance policies, etc) which are cheaper than normal unsecured loans.

wordsworth asked, Hello Harsh, we are two language professionals, catering to the Indian IT, corporate and media and are the market leaders in our field. However, the issue is that we are still awaiting the type of structure funding that a business concern requires and are funding our business through various personal and business loans which are available at 17-20 per cent.

Considering that we would ideally like to have a more reasonable and systematic bank funding, what are our options? We are in the service sector and handle domestic as well as exports of services pertaining to various Indian and international languages.

Harsh Roongta answers, If you already have a couple of years of good track record on your existing loans, then that itself may serve as a good base to get a regular business loans. Also explore the possibility of getting secured loans on property, finacial securities or jewellery as they come cheaper. 

agarwalankur asked, Sir, in an ideal scenario what should be the maximum EMI percentage an individual should afford in percentage terms?

Harsh Roongta answers, It depends on your income; the higher the income, higher is the percentage you can afford to pay as EMI. However, as a general rule of the thumb, about 40 per cent of your net income is coinsidered safe. Anything above 55 per cent is in the red zone.

Part I -- How to get a cheap personal loan

Part III -- Tomorrow