I am a private sector employee living in Navi Mumbai. I am planning to take an early retirement to start my own venture. Currently, I have a personal loan towards which I am paying an EMI of Rs 10,000 per month. I have the necessary corpus to repay the personal loan. Should I repay the whole amount before starting my own venture? Please advise.
-- Pradeep Ingale, Navi Mumbai
This question is not easy to answer directly. Definitely, personal loan is an expensive loan and should be got rid of at the earliest. However, if the pre-payment is going to affect the capital available for your new venture, it may be better to continue the loan. Similarly, if you repay the loan but have to borrow capital for your venture at rates higher than the personal loan, it does not make sense to repay the loan. So, you have to weigh the pros and cons before pre-paying the loan.
I am a private sector employee with an annual salary of Rs 7 lakh. Currently, I have a credit card due of Rs 80,000, on which I am paying an interest of around 36 per cent per annum. I am planning to take a personal loan and repay the whole amount outstanding on my credit card. Will this be a right financial decision? Kindly guide me on this matter.
-- Diwan Rastogi, New Delhi
Personal loans are expensive but credit card outstanding dues are prohibitive. So it comes down to choosing the lesser of the evils. Ab initio, it makes sense to take the personal loan, if you are getting it at reasonable rates and a financial entity is prepared to give it and clear the credit card dues. But this personal loan too should be attempted to be cleared at the earliest.