Personal Loan Balance Transfer to Save on Your EMI


16 Jul 2019 | 4 min read

Are you going through stress of unnecessary debt burden?

Do you want to reduce your personal loan EMI?

Then, you have landed on the right space. Yes, there is a perfect solution for unmanageable interest rates, and this is Balance Transfer. Go for it and settle all your debts with one personal loan at low interest of rate. 

What is a Balance Transfer?

A personal loan balance transfer is a process that allows a customer to transfer his or her personal loan from an existing lender to a new lender.  By means of this, you can enjoy a lower rate of interest on the outstanding amount. The primary reason for transferring your balance is to reduce the burden of a personal loan. Almost all lenders offer a balance transfer facility for every type of loan – personal, education, auto etc. Hence, after the transfer of a personal loan, the applicable rates and charges will be as per the policy of a new lender. It will help you save on the interest you have to pay every month.

Let’s say if you have taken ₹ 300000 as a personal loan from an NBFC with a 12% annual rate of interest. A possible repayment method is paying ₹ 9964 every month for 36 months. However, if you transfer your outstanding dues to a new lender at the rate of 11 % for the same period, then the EMI will fall down to ₹ 9821. There will be savings of ₹ 143 per month, and the entire savings will be ₹ 5148.  

Case Study –

Loan Amount = Rs 5 lakh

Existing rate of interest = 15%

Tenure = 5 years

EMI Paid = 1 Year

The Person’s EMI is coming Rs 11,895. He got to know about Personal Loan balance transfer and transferred the remaining balance to HDFC at an interest rate of 13.49%

So, now –

Reduction in interest rate = 1.51%

Remaining Tenure = 4 years

EMI = Rs 11,570

Total Savings = Rs 15,600

Benefits of personal loan balance transfer

☑ Better interest rates: It is one of the biggest benefits . The new lender usually lowers the interest rate on personal loan, which ultimately reduces borrower’s interest burden and thereby EMI burden. You can understand personal loan balance transfer with this example. If you take a personal loan of, say, Rs. 5 lakhs for 60 months at 12.5% interest per annum, the interest rate applicable on your personal loan for the entire tenure would be Rs. 1,74,938. After 10 installments, if you decide to transfer your personal loan from existing bank to a new lender offering lower interest rate, say 11%. Now your principal outstanding is approximately Rs. 4,36,682. On balance transfer, the interest rate you would need to pay for the outstanding loan for the entire tenure would be Rs. 1,09,655. In this case, you save almost Rs. 16,111 in the form of the interest rate. However, you should request your current lender to reduce the interest rate, and if the lender is not willing to reduce, consider a balance transfer.

☑ Top-up loan facility: Don't worry if you are in need of more money, many lenders offer top-up loan or additional loan options on a personal loan balance transfer at a competitive interest rate. So rather than applying for a new loan, you can apply and get a top-up on a personal loan transfer to meet your requirements.

☑ Extended duration: While transferring your personal loan, you can negotiate the tenure of the existing personal loan as per your requirement. You get the tenure of your personal loan extended or reduced that is comfortable for you. EMIs and interest increase accordingly.

☑ Better Services: It is a better option, if you are not satisfied with your current bank or lender. You can transfer your personal loan from existing lender to a new lender who you think can offer better after-sales services.

Personal loan balance transfer is now very easy. To stand the benefits of better services and a lower rate of interest, everyone should consider this option, at least once during their loan.

☑ Transfer process: Transferring the outstanding balance from an existing lender to a new lender is simple and hassle-free, and needs minimal documentation. You have to contact your current lender to collect the information about outstanding principal amount, tenure completed till date, current rate of interest, and on whose name the demand draft has to be made. After that, you should approach a new lender to execute the formalities.

Before applying for a personal loan balance transfer, you should consider these factors:

  • Assess the profits and convenience: It is essential to calculate how much you can save and what other benefits you get with offers from new lenders. You can use a personal loan balance transfer calculator to compute the savings and EMIs.
  • Consider the cost involved: It is necessary to consider the interest rate and other charges the new lender is offering for the balance transfer. Sometimes, the cost of a balance transfer of a personal loan may cost you more than you save on interest reduction.
  • Read the fine prints carefully: Before signing the personal loan balance transfer agreement, read the terms and conditions carefully. They may contain some hidden charges. 

Documents required for a personal loan balance transfer

For salaried employees:

  • 3 months’ salary slips
  • 3 months’ bank statements showing salary is being credited
  • Identity proof: any of the Voter ID card/Aadhaar card, passport, driving license
  • Address proof: any of the Telephone bill/Electricity bill/Water bill (for the last three months)
  • PAN Card
  • KYC documents
  • Filled personal loan balance transfer application with photographs

For self-employed individuals:

  • PAN Card
  • Balance Sheet and Profit & Loss Statements, with relevant annexures and schedules, from the last 3 years
  • Current account statements of the business
  • Savings Account statements of the individual

Every lender has its own customer assessment procedure that includes your credit history and account details. If you have been punctual with repayment, and your debt to income ratio is good, your application for a personal loan balance transfer will be accepted

What are the limitations of a balance transfer?

Like the two faces of a coin, everything in this universe has both pros and cons. When you are going for a balance transfer, always consider the fee associated with it. It should not be like that, you end up paying a high fee for a balance transfer and your savings even after a balance transfer not gets justified on the other side of the ledger. 

How you can reduce your EMI

In case if you are repaying the loan with a higher interest rate, it is a wise decision to go for a balance transfer. When you transfer your balance, you can reduce your interest rate by 1%. Now, let’s see the personal loan interest rates of several lenders.


Interest Rates

State Bank of India

9.60 %

Yes Bank

10.75 % - 21.30 %


11.25 %

Standard Chartered Bank

13 %



Bajaj Finserv


Kotak Mahindra Bank


Axis Bank

12 % - 24 %

RBL Bank


Fullerton India


Tata Capital


IndusInd Bank


DSB Bank


Will a balance transfer affect your credit score?

If you repay your debts timely, it will impact your credit score positively. You can easily track your payment date and make timely payments for a single loan. If you open multiple accounts, you will do multiple inquiries, and these directly affect your credit score. 

Another noteworthy point is the credit utilization ratio. Keep it below 30% for maintaining a good CIBIL score. 


Recent Blogs