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 programme benefits borrowers who have a limited tenure time or who pay higher EMIs on their personal loans. One must, however, carefully consider the balance transfer offers and the entire cost associated with them before taking advantage of them.
Why Personal Loan Balance Transfer?
By enabling customers to transfer their continuing loan to another lender at a reduced interest rate, personal loan balance transfers guarantee that borrowers are not burdened with high EMIs. However, if a borrower is unhappy with the services provided by the existing lender, he or she is also free to select a personal loan balance transfer. However, before choosing one, you should consider the conditions as well as the overall cost of transferring the loan, savings that will result, and other costs.
Lower interest rates: The most significant benefit which you get with a personal loan balance transfer is – you can shift your loan to a lower interest rate. A lower interest rate means a lower EMI and a greater saving so that you can focus on your other financial goals.
You can change your loan tenure: Personal loan balance transfer gives you the benefit of changing your loan tenure. A longer tenure means lesser EMIs and a shorter tenure means higher EMIs but this ends your loan fast and hence can save on the interest. So, when you go for a home loan balance transfer you can choose a tenure as per your requirement.
Access to top-up loan facility: When you opt for a personal loan balance transfer you also get access to a top-up loan facility. Let’s understand this with an example- suppose you transfer an outstanding amount of 4 lakhs to a new lender but in case you need 2 more lakhs to meet up your requirements then you can get that fulfilled easily with your new lender. In this case, your total loan amount will become 6 lakhs and you will be charged EMIs accordingly.
Can avail better terms on the loan: While going for a personal loan balance transfer you can always choose a lender who is offering the same loan at better terms. Be it better terms related to tenure, payment, pre-closure or processing fee.
Eligibility Criteria on Personal Loan Transfer
- The borrower must have served the lock-in period of the existing loan which is a minimum of 12 months with most of the lenders.
- A clean record of EMI payments for the ongoing loan.
- CIBIL score as required by the bank, usually 700 or above.
How to Apply for a Personal Loan Balance Transfer?
- To apply for a personal loan balance transfer, a borrower must get a NOC and foreclosure letter from the current lender.
- Apply for a personal loan with a new lender who is offering a balance transfer facility.
- Get approved for the new loan and obtain a sanction letter.
- Take disbursement from the new lender through cheque/ demand draft in favour of the existing lender and deposit the same to the existing lender.
- After getting the cheque from your existing lender, check that they have cancelled all the cheques and ECS and closed your loan account.
But, before you apply for a personal loan balance transfer, you must know the- The difference in the interest rate of the existing lender and new lender, additional charges for your new loan and the total savings which you are going to make.