Confused as to why you pay interest even after paying the minimum amount due on your credit card?

On the other hand, do you think that the personal loan you have taken charges a very high rate of interest? Do you want to prepay this loan? What are the penalties for doing so?

Is it possible to keep on transfering balance amount on your credit card indefinitely?

Get Ahead Money expert Harsh Roongta answered credit card and personal loan related queries in a chat with Get Ahead readers on March 27.

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

Part I - Don't borrow on your credit card! Here's why

aravind asked, I have taken a personal loan from Citi Finance for Rs 200,000 but interest rate is going to 22% want to close tell me the way?

Harsh Roongta answers, Normally, personal loans are made on fixed rate of interest. So the interest rate must have been 22% right from the beginning. I am afraid you will have to pay stiff pre-payment charges if you decide to pre-pay your loan. But, if you have surplus funds, this make still make sense.

loanoloanoloanmela asked, Thanks Mr.Harsh...another important question. Say I have purchased goods for Rs 20,000 using Credit Card. If I use revolving credit, I need to pay Rs 1,000 as min amt due. For, rest Rs 19,000, bank charges interest. But, what I learn now from ICICI is, even if you pay Rs 11,000, the bank still charges interest for Rs 19,000 and not unpaid balance of Rs 9,000. (I have personally experienced this...I would advise people in case if they are not able to pay full amount, it is better to pay only Min Amt Due as part payment has no effect on interest charges) Why this anomaly?/ or is it a systemic fraud?

Harsh Roongta answers, That is not correct. You will pay interest only on the amount unpaid (which means Rs 9,000 and not Rs 19,000). What might have got you confused is that for the period from the date of incurring the expenditure to the first payment date the interest will be charged on Rs 19,000. After you have made the first payment the interest charged is on the amount remaining to be repaid (Rs 9,000) and not gross amount minus minimum payment due (Rs 19,000).

kesri30 asked, abt 0% balance transfer on Credit Cards, how long can we keep on rotating the fund if we have 3 or more cards?

Harsh Roongta answers, Theoretically indefinitely. Though it will rarely work out in practice due to the inherent systemic issues. Not something I will advise you to do unless you are willing to spend a good part of your day just calling banks and getting your things done.

arvind asked, I have an offer of a personal loan of Rs 1,65,000 at an EMI of Rs 5,288 for 48 months. Should I accept the offer?

Harsh Roongta answers, By using the calculator on www.apnaloan.com you can find out that the effective rate for this loan works out to 23%, assuming the first installment is paid after 1 month from the date of disbursement and monthly thereafter. I am unable to comment on whether the rate is good or not as that will depend on your profile.

kunhal asked, Hi Harsh, I had two personal loans and one housing loans and facing very difficult times to pay off every month. Can I get a top up loan from my housing loan as I am having property in Badlapur?

Harsh Roongta answers, If the value of your property has risen and your income has also risen and if you have not defaulted on any of your loans, you should be in a position to get a top off loan to pay off the personal loans from your existing home loan lender. If he is not willing, another bank may be willing to give higher loan amount to pay off all loans. Of course, not all banks are active in Badlapur and this will restrict the choice of banks available to you.

shariff asked, Hi, i had taken an Housing loan of Rs 900,000 couple of years and Citibank charged me 10.5% Floating and since then they have changed it more then 4 times and now its 14.5% can i change over to Fixed if so how will it benefit me. please suggest. Thanks for your time.

Harsh Roongta answers, 14.5% is a grossly high rate. If you have good income papers and have a impeccable repayment track record on your existing loan, you should consider switching banks. You should get a genuine fixed rate home loan at around 12.50% and floating rate at around 10-10.50% from another bank. 

geniusvinny asked, My mother took a personal loan of Rs 2 lakh from Citi Bank about 10 months ago. At the time of taking the loan they promised that we can prepay it by paying 2% charges on the balance amount. Now they are asking for 4%. Please tell us what should be done. We have no written document from them stating their promise.

Harsh Roongta answers, Please read the loan agreement you signed with the bank. That will mention the prepayment charges. If you do not have a copy of the agreement -- most consumers do not ever get a copy of their agreement and some do not bother to keep a copy even if they receive it -- then also if you can try and prove the verbal promise through the evidence of independent people present at the time the promise was made.

You should file an official complaint with the bank on its website. If you do not receive a satisfactory response, you should file an official complaint with the Banking Ombudsman. Since you do not have a written promise, all this may however not result in any relief. But ensure that under no circumstances should you default on your loan commitments as it will completely ruin your chances of ever getting a loan in the future

Debajit asked, Hello Mr.Harsh Roongta, one more. Is there anyway to curtail/stop cold calls of personal loans or free credit card calls on mobile phones/lan phones? There was a court notice sometime back, nothing happened thereafter. Just read CC interest rate article, study is eye opener. Thank you for your precious time.

Harsh Roongta answers, The general Do Not Call registry is expected to be operational within the next few quarters. Meanwhile you can go to the individual websites of the bank and register your number on their individual do not call registries.

J. H. Rao asked, Is it appropriate to buy air conditioner on credit card or by taking personal loan? If personal loan, then from which Bank?

Harsh Roongta answers, Buy it on the credit card but take a personal loan to pay off the amount.

loanoloanoloanmela asked, No Mr.Harsh...say for example..I have 50 day credit free period. I buy something on day 1 for Rs 10,000. On day 50, I pay Rs 6,000. So....why should the bank charge interest for Rs 10,000. The chargeable amount is only Rs 4,000, isn't it?

Harsh Roongta answers, You lose your free credit period if you do not pay off the full amount on due date. This applies with retrospective effect.

abhijitabhijit asked, dear sir, Good afternoon sir ! I took a home loan at 7.5%, and now its 10.25%. whats the logic ... if my salary has not increased and if my budget permits an EMI as agreed earlier. Who should be penalised for this ? Can I do something about this ? pls advice !!!!

Harsh Roongta answers, I am afraid that is the price we pay for living in an economic democracy. Think of it this way. In the bad old days the interest rates were dictated by the government so availability was extremely restricted. With the opening up and liberalisation even as availability has increased we have to bear the fluctuations. It is like the price of foodstuff.  Whilst no body is happy about the increase we have to grin and bear it.

nadeem asked, dear sir iam NK SHAIKH frm MUMBAI, I am looking for a personal loan and few months back I did apply in couple of banks but frm there I got the reason as my IT returns are lower in comparison to previous financial year so i wanna know how do i avail a loan on what basis should i apply? I am a self-employed and in recent past my business hadn't done too well..pls guide.

Harsh Roongta answers, I am afraid you will face issues in raisng an unsecured loan. Have you considered looking at secured loans such as loan against jewellery, shares, mutual fund units, life insurance policies, etc?

phatibarua asked, I have an outstanding of Rs 22k on my CC and about Rs 28k on my personal loan. Should I top up my personal loan to pay off my CC outstanding?

Harsh Roongta answers, Yes.

amithazra asked, Two foreign banks are offering Business credit cards to professionals and business men as an alternative to the customary cc limit - at a relatively high interest 2.9% per month,although without the customary securities/mortgages. I am a consultant in my mid fifties with average income and means and looking for soft loans to tide over past financial indiscretions. Have a good record in meeting credit card dues and personal fund interests for more than a year. What in your opinion are the pitfalls in the scheme for me?

Harsh Roongta answers, I will not advise this course of action. Please consider secured loans or even consider soft loans from relatives. Borrowing at such interest rates may only worsen your situation in the future. PLEASE DO NOT TAKE A HASTY DECISION WITHOUT TAKING PROFESSIONAL ADVICE.

Harsh Roongta says, Thanks a lot. If I have not been able to answer all questions I apologise. Please read the transcript for answers to similiar questions. You can also log on to http://www.apnaloan.com/ for any further details and questions. Bye for now.

Part I - Don't borrow on your credit card! Here's why