Personal loans are a great financing option that can help you meet instant fund requirements. An instant personal loan can be availed for a variety of purposes such as managing wedding expenses, funding children’s education, for medical exigencies, etc. Since personal loans are unsecured loans, borrowers do not have to pledge any collateral while availing them. Nowadays, a large number of financial institutions offer enticing policies and attractive interest rates on personal loans. The lower the interest rate on a personal loan, the lower will be the repayment burden. Keeping this in mind, a large number of financial institutions have come up with the concept of personal loan balance transfer.
Let us understand the details of personal loan balance transfer
- A personal loan balance transfer allows the borrowers to transfer their personal loan to another lending institution that offers them better interest rates. This allows them to lower their EMI burden and loan tenure.
- While opting for a personal loan balance transfer, the borrowers are required to satisfy the eligibility criteria set by the financial institutions. Different financial institutions have different parameters to approve the personal loan balance transfer.
- If borrowers have paid their monthly EMIs regularly, it improves their credit score as well as their chance of approval for a personal loan balance transfer.
Procedure for personal loan balance transfer:
- Check the personal loan balance transfer interest rate and calculate interest savings.
- Calculate the approximate cost of personal loan transfer on account of various fees and charges.
- Calculate the benefits and decide if you wish to transfer your loan or not. Shortlist new lenders that you wish to transfer your existing loan to. Compare their interest rate offers, your loan amount eligibility and their loan process.
- If you decide to go ahead with the transfer, apply for a NOC and foreclosure letter from your existing lender.
- Apply for a loan at a new lender, submit your loan documents with complete repayment record.
- Obtain sanction letter and execute a new loan agreement with the new lender.
- Take disbursement from the new lender by way of cheque/ demand draft in favor of the existing bank and deposit the same with the existing financial institution.
- On receipt of the loan outstanding, your existing lender will cancel all the cheques and ECS and close your loan account.
Documents Required for Personal Loan Transfer
- Filled application form with passport size photograph duly signed
- Identity and age proof (PAN card/ passport, driving license/Aadhaar card/voter id card)
- Address proof such as electricity bill, Aadhaar card, etc.
- Last 3 months salary slip and last 6 months bank statement
Some of the major benefits of availing a personal loan balance transfer are stated as under:
Lower interest rates
Most borrowers opt for a personal loan balance transfer if they find a lender that provides personal loan at a comparatively lower interest rate. This is because even a slight reduction in interest rate can help them save a large amount in the long run. Due to the increasing competition in the banking sector, a lot of financial institutions offer loans at lower interest rates.
The personal loan balance transfer does not block the facility of loan pre-payment. Therefore, the loan can be pre-closed at the borrowers’ discretion.
As a result of the high top-up value, the loan repayment will be faster with fewer amounts towards interest.
Poor service of the current lender
Borrowers can opt for a personal loan balance transfer if their existing lender doesn’t provide quality service, for example, doesn’t issue loan statements, has bad customer care service or, is slow in reacting to changes in interest rates
Now that you are well aware of the benefits of a personal loan balance transfer, let’s have a look at the factors that you should consider before opting for a personal loan balance transfer.
- Check the number of EMIs remaining and calculate the interest that has to be repaid
- Check if your existing loan-provider permits personal loan balance transfer
- Check with your new lender regarding the additional charges levied such as processing charges, legal and technical report expenses, etc.
- Lastly, do not forget to compare the total savings that you would be making by availing the Personal Loan Balance Transfer.
If you have already completed a major portion of your loan tenure, opting for a personal loan balance transfer would not be a wise decision. This is because while opting for a new lender you will have to pay balance transfer processing fee and other charges. By paying such extra charges you may end up paying even more amount than required. Hence, you must access all the aspects of a personal loan balance transfer before going ahead with it.
The process of a personal loan balance transfer may require heavy documentation. It is recommended that you should be ready with all the required documents before applying for a personal loan balance transfer. You should also research the financial institution you are opting for before going ahead with a personal loan balance transfer. Since every lender has an online presence nowadays, you can easily compare their reviews. Always settle for a financial institution with a decent presence in the market.
Before applying for a personal loan, make sure that you calculate your personal loan eligibility with the help of an online eligibility calculator. This will reduce the chances of rejection of your personal loan application. Additionally, you can calculate your monthly EMI with the help of an online EMI calculator. The results obtained through online EMI calculators are transparent and accurate. This can help you plan your monthly expenses wisely.