Personal Loan Balance Transfer
We all can agree to the fact that nothing is as sweet as money in our life. As human beings, we always look for more value at low cost and low-price benefits. As a borrower, we keep searching for different means to cut down on the cost of loans and advances that we take. The best way to reduce the cost of a loan is to transfer the outstanding balance of your personal loan to a new lender, who offers us the better rate. It is beneficial for your credit history and your credit score also.
What is a Personal Loan Balance Transfer?
Transfer of personal loan is not a new concept. In a personal loan
, you get a loan from the bank at a certain interest rate say 11.9%, now after paying a few EMIs, you simply transfer the outstanding loan amount to another lender of your choice, which is offering at 10.9%. You will choose a lender that offers you a low-interest rate. When you transfer the loan balance, it will not bring any complication for you in terms of repayment or anything else. Here, the amount of EMI will reduce. This means your outflow will come down and the loan will be less of a burden on you. The loan installments will change because of the change in interest rate. However, a lot depends on the rules of the lender, tenure, and the repayment system.
Eligibility Criteria for Personal loan Balance Transfer
As a borrower, you need to meet specific eligibility criteria to get the most out of a personal loan balance transfer. The eligibility also depends on the borrower’s ability to repay the loan and his creditworthiness. Most banks have a common criterion that includes:
- An outstanding loan amount of at least INR 50,000 to initiate the balance transfer process.
- Clean loan repayment record of the past. At least the last twelve installment payouts will be checked and it should be clean and consistent.
- Any other credit card or loan in good standing.
Feature & Benefits of a Personal Loan Balance Transfer
Consider the benefits of transferring your personal loan to make a well-informed decision.
1. Get a better interest rate: The main reason why borrowers are attracted to a personal loan balance transfer is to get a better rate of interest. You need to consider the interest rate offered by the second bank before you make the decision. A personal loan balance transfer will only be beneficial for you if the interest rate offered by the second lender is lower than what you are paying currently. A low-interest rate will be helpful as it will reduce the financial burden and will make it easier for you to pay the loan faster.
2. Get lucrative deals:Those with a good history of paying EMIs on time, banks can get you good deals on the transfer. If you have a good credit score, the loan eligibility requirements are simple and the lender might offer you a low interest rate and charge you a minimum amount for the transfer. You could also enjoy zero processing fees on loan. If you have a positive credit score, you can go through different options available and choose the one that suits your needs.
3. Get a top-up loan: There are times when you borrow money initially in the form of a loan, but it might not be sufficient to fulfill all your requirements. In such a situation, you have the option of taking a top-up loan which allows you to borrow additional money on loan. In case your lender does not agree to give you the loan, you can opt for a personal loan balance transfer to get a good deal. A different lender may be willing to give you extra funds at a better interest rate when you transfer the loan.
4. Get a lender with better service:If due to some circumstances, you want to terminate the association with a lender, you can opt for a personal loan balance transfer. You can opt for a different lender that offers a better interest rate, better services, and can transfer your outstanding balance at low processing fees.
Steps to Transfer your Personal Loan
Here is a detailed procedure you can follow to transfer the personal loan without shelling out more money than necessary.
1. Conduct inquiries and consider the outflow
The first step to make a personal loan balance transfer is to inquire with as many lenders as you can and get an idea about the schemes available for you. This will ensure you make the most of the available scheme and get the best possible rates. At Afinoz, you can get a lender for personal loan balance transfer and a lender could give you an offer that will reduce the EMI by offering a longer tenure.
However, this will increase the amount that you have to pay back because of the added interest that accumulates over the tenure. Your goal is to reduce the EMI and ultimately bring down the monthly outflows. If your current EMI is favorable as compared to the lenders in the market, stick to the current lender. However, if you can benefit by making a shift, opt for a lender that cuts down on the interest rate.
2. Consider different fees
To transfer the personal loan, you will be required to provide complete details of your existing loan like the outstanding amount, rate of interest, and tenure. The new lender will also look at the repayment track record of the past one year before allowing a transfer. You need to consider the processing fee, legal charges, stamp duty, valuation fees, and other technical charges. Consider all the fees and make a comparison to see if the balance transfer will be profitable for you or not. Different lenders use different methods of calculation of processing fee. Some lenders take it as a percentage of the total loan amount while many others have a fixed amount for all. In this case, you need to consider the cost and compare it with the current lender. Additionally, your present lender might increase the cost of closure if it finds out that you have transferred the loan to a new lender. This could result in the bank asking you to pay fixed interest rates instead of floating interest rates.
3. Submit the documents
After you have decided to transfer the loan, you need to submit certain documents like bank statements, identity proof, and salary slip, address proof, etc. Some banks ask you to open a savings account with them and route the money through it. Hence, if the bank asks you to do so, inquire about all the additional facilities that are provided with a savings account.
4. Understand the terms and conditions
After the application has been processed, the bank will disburse the amount and it will be credited in your account. But before you agree to take the loan, you need to read the terms and conditions thoroughly. Ensure that the terms and conditions do not add to your expenditure. Some lenders offer free benefits with loans like a free credit card or an insurance policy. Before you opt for them, you need to analyze if you require them or not. They could be free initially but can be chargeable at a later stage. Hence, read the documents thoroughly and then sign off the personal loan transfer. A personal loan transfer can ease your financial burden, but it is essential to look at both sides of the loan.
How Personal Loan Balance Transfer works?
A personal loan balance transfer is a process of transferring the existing outstanding personal loan balance from one lender to another. Once the balance transfer is done then you can enjoy the low-interest rate and save on your EMI. Let’s have a look at how this entire process works:
Process of Personal Loan Balance Transfer
If you want to go for a personal loan balance transfer, take a look at the process below:
- Check the current rate of interest for your loan that you can get and calculate the interest savings.
- Calculate the estimated cost of loan transfer including various fees.
- Calculate the net benefits and decide whether you want to transfer your loan or not. Shortlist the new lenders that you wish to transfer the existing outstanding loan to.
- Compare and check the offered interest rate, your loan amount eligibility, and their entire loan process.
- In case you wanted to go ahead with the balance transfer, apply for a NOC and foreclosure letter from the existing lender.
- Apply for a loan at the new lender; submit the loan documents with a complete repayment record.
- Obtain a sanction letter and execute the new loan agreement with the new lender.
- Take the disbursement from the new lender via cheque/ demand draft in favor of an existing lender and deposit the same with the existing lender.
- On receipt of a loan outstanding, the existing lender will cancel all the cheques and ECS and close your loan account.
Personal Loan Balance Transfer Charges
The charges of personal loan balance transfer vary based on the existing lender and the new lender. The key charges for loan balance transfer include the foreclosure charges to be paid to the existing lender and the processing fees. Foreclosure rates differ from lender to lender generally ranges up to 2%. However, few lenders in the market have zero foreclosure charges. Processing fees are payable to the new lender on the balance transfer and which may vary based on the lender and outstanding loan amount.
Personal Loan Balance Transfer Calculator
Use the personal loan balance transfer calculator to figure out the reduction in EMIs and the cost of the loan, resulting from a personal loan balance transfer. Using personal loan balance transfer calculator is pretty simple; complete the following steps to find out profits from the balance transfer.
- Enter the principal outstanding of your existing personal loan
- Enter the balance loan tenure of your personal loan
- Enter the interest rate offered by the new lender
Personal Loan Balance Transfer offers
Lenders offer timely discounts and other benefits on loan transfer. The primary objective of the personal loan balance trance is to reduce the burden of the monthly EMIs. Suppose Mr. X has an existing personal loan outstanding amount of Rs. 2 Lakhs for tenure of 4 years. He can transfer the existing personal loan to a new lender at the lowest rates. By transferring a 4 years personal loan of Rs. 2 lakhs from 14.5% to 13.2%, the EMI can reduce from Rs. 5,516 to Rs. 5,385. So, the total savings on the interest after balance transfer is Rs. 16,678.
Documents Required for Personal Loan Balance Transfer
The list of required documents for personal loan balance transfer may vary based on various factors. Here is the generic documents list:
- Filled application form with passport size photographs
- Identity Proof (PAN card/Aadhaar card/ passport, driving license/ voter id card)
- Address Proof (Aadhaar card/ Electricity bill/ telephone bill/ rent agreement)
- Latest 3 month’s salary slip, and 6 months bank account statement
Things to consider before Personal Loan Balance Transfer
Keep the below-mentioned things in mind before you make a decision to transfer your loan.
1. Processing fees: You had already paid the fees when you first applied for the loan. Now, when you switch to a different lender, it will be processed as a new loan application, and you will have to pay the processing fees. Consider the costs, and whether it is beneficial to switch or not.
2. Collateral: A lot of borrowers provide collateral as security, and they use the same collateral with the new lender as well. If you have already paid a large part of the loan, then providing security that costs much more than the outstanding amount will not be a wise idea.
3. Cash outflow: The biggest attraction in a personal loan balance transfer is that you have a low interest rate. You think that the tenure will get longer and the low interest rate will bring down the amount of EMI. It is important to calculate the amount of EMI you will have to pay to your lender. The total outflow of cash should not be more than what you are required to pay.
Understand the terms and conditions before you sign on the papers: It is very important to understand the terms and conditions of the loan before you get into a loan agreement because there could be a hidden cost you might have overlooked.
Is it advisable to transfer the personal loan?
A personal loan is not something you can buy anytime you feel like. Hence, before you apply for a personal loan, you have to consider its requirements, pros and cons. You need to be very sure that you need the funds and you will be able to repay the same in due time. If you are applying for a personal loan, it will definitely give you some benefits. The most significant advantage of a personal loan balance transfer is the low-interest rate and long tenure. When you can get a low-interest rate on loan, it is beneficial for you. You will be able to expand the mandate and repay the loan in due time without any default. Once you pay your EMIs on time, it will enhance the credit score. However, you need to remember that the EMIs should be consistently paid and there should not be any default. With a low-interest rate, it should be easier for you to pay the EMIs. All borrowers are trying to cut down on the interest rate and to reduce the amount of EMI. However, you cannot simply switch to a low-interest loan. You need to consider the rules and regulations of the bank from where you have borrowed and also understand whether the new lender is willing to give you a loan at low interest.
Best banks offering Personal Loan Balance Transfer
1. Personal Loan Balance Transfer to Axis Bank
You can transfer the outstanding amount of your existing personal loan to Axis Bank and can enjoy the low-interest rate on EMI.
2. Personal Loan Balance Transfer to Kotak Bank
The Kotak Bank offers unparalleled services of personal loan balance transfer with a low rate of interest and many additional benefits.
3. Personal Loan Balance Transfer to Bajaj Finance
Do you have an existing personal loan from any other bank or NBFC? You can transfer the personal loan balance to Bajaj Finance account. If you go ahead with this, the EMIs will decrease and you can save a lot of money.
4. Personal Loan Balance Transfer to SBI
Are you looking for better features for your already acquired personal loan? If yes, then you can easily shift the balance amount of your existing personal loan to SBI Personal Loan
5. Personal Loan Balance Transfer to ICICI
Transfer your loan to ICICI Bank and save on your Equated Monthly Installment (EMI) with a low rate of interest along with hassle-free documentation.