The process of moving the outstanding loan balance from an existing personal loan account to a new account with another lender is known as a personal loan balance transfer. Transferring the amount of a personal loan is typically done to take advantage of better deals, such as cheaper interest rates and advantageous features. The program benefits borrowers who have a limited tenure duration or who pay higher EMIs on their personal loans. One must, however, carefully consider the balance transfer offers. Also, the entire cost associated with them before taking advantage of them.
Benefits of personal loan balance transfer
By enabling customers to transfer their continuing loan to another lender at a reduced interest rate, personal loan balance transfers ensure that borrowers are not burdened with high EMIs. However, if a borrower is unhappy with the services provided by the current lender, he or she is also free to select a personal loan balance transfer. However, before choosing one, you should consider the terms as well as the total cost of transferring the loan, savings that will result, and other costs.
Lower interest rates
You can move your loan to a reduced personal loan interest rate, which is the main advantage of a balance transfer. A lower interest rate translates into a reduced EMI and more savings, allowing you to concentrate on other financial objectives.
You can change loan tenure
You get the advantage of modifying your loan tenure with a balance transfer. A shorter duration results in higher EMIs, but your loan will be paid off sooner, saving you money on interest. A longer tenure results in lower EMIs. Therefore, you can select a tenure when you apply for a personal loan balance transfer based on your needs. You can calculate the EMI using a personal loan EMI calculator.
Access to the top-up loan facility
You have access to a top-up loan option when you choose a personal loan balance transfer. Let’s use an example to further explain this: Suppose you transfer a balance of 4 lakhs to a new lender, but you later discover that you need an additional 2 lakhs to complete your criteria. You can simply fulfill this need with your new lender. In this scenario, your total loan amount will be 6 lakhs, and you will be assessed EMIs in line with that amount.
Better terms on the loan
You can always select a lender that is offering the same loan with better terms when you decide to transfer the balance of a personal loan. Better payment, tenure, pre-closure, or processing fee terms, for example.
Eligibility for a balance transfer
- The borrower must have completed the lock-in period of the existing loan. It is for the majority of lenders is a minimum of 12 months.
- clean history of loan payments, including EMIs.
- CIBIL score, often 700 or above, as required by the bank.
How to apply for a Personal Loan balance transfer
- A borrower needs to obtain a NOC and foreclosure letter from their present lender. It is to apply for the loan balance transfer.
- Use a new lender who is providing a balance transfer service to apply for the loan.
- Receive a sanction letter and new loan approval.
- Take a check or demand draft made out to the previous lender in favor of the payout you received from the new lender and deposit it there.
- Verify that your existing lender has ended your loan account. Also canceled all of your checks and ECS after you receive the cheque from them.
However, before you apply for a personal loan balance transfer, you should be aware of the following: The difference between the interest rates charged by your current and new lenders, additional fees for your new loan, and the total amount of savings you will get.