Individuals take out a personal loan from a bank or a non-banking financial corporation (NBFC) to suit their personal needs. It is based on crucial parameters such as income, credit and employment history, repayment capacity, and so on. A personal loan is not secured by any asset, and the borrower is not required to put up any collateral, such as gold or property, in order to obtain it. As a result, if you default, the lender will not be able to sell anything you own at auction. The personal loan balance transfer function is used when you move an outstanding personal loan balance from one bank to another.
What is personal loan balance transfer?
Personal loans balance transfer is a procedure in which a consumer transfers his or her entire outstanding personal loan amount from one lender to another that offers a reduced interest rate. When considering a personal loan balance transfer, you should carefully consider the various offers and select the best one to save the most money on total interest.
The process of transferring a loan balance does not necessitate the provision of any security or collateral to the lender. The existing lender may levy certain foreclosure charges as part of this process. It could also result in administrative fees from the new lender, as well as stamp duty on the loan agreement, if applicable.
Process of balance transfer
- Calculate your interest savings by looking up the current interest rate on a personal loan.
- Evaluate the approximate cost of transferring a loan, taking into account various fees and charges.
- Check your net advantages and determine whether or not to transfer your loan. Make a list of new banks to whom you’d like to transfer your existing loan.
- Compare and contrast their interest rate offerings, as well as your loan amount eligibility and loan application process.
- Apply for a NOC and foreclosure letter from your current bank if you decide to go ahead with the transfer.
- Apply for a loan at the new bank, and send in all of your loan documentation, including your repayment history.
- Obtain a letter of approval from the new bank and sign the new loan arrangement.
- Take a payout from the new bank in the form of a check or demand draft payable to an existing bank and deposit it with that bank.
- Your existing bank will cancel all checks and ECS and shut your loan account if you have an outstanding loan.
Benefits of personal loan balance transfer
Here are some of the advantages of transferring a personal loan balance that you should examine before making a decision.
Interest rate benefit
One of the most significant advantages of a balance transfer is that it decreases the personal loan interest rates, lowering your interest load through lower EMIs. On the loan transfer, the new lender would offer a reduced interest rate. However, before using the balance transfer option, it is usually a good idea to examine the need, evaluate the offer, and compare the rates and features.
Extended loan tenure
When moving a personal loan from one lender to another, you can negotiate the repayment term of an existing loan and have it extended or lowered to meet your needs. You may have a reduced monthly EMI load but a greater total interest pay-out if you choose an extended term. Short-term loans, on the other hand, result in a lower total interest load but larger individual payments.
You can negotiate with lenders for better loan features like waiver of the last EMI, no processing costs, cheaper interest rates, and so on, depending on your repayment history and current income. The balance transfer option on a personal loan can help you save money on interest while also giving you access to superior loan features.
Top up loan facility
In addition to personal loan balance transfers, most banks offer a top-up facility. These are available at a very low interest rate and at a competitive price.
- You must already have a personal loan with another bank.
- A minimum loan sum of Rs. 50,000 or more is usually required by banks.
- At least a 12-month track record of making EMI payments
- It’s crucial to have a solid credit score and a long credit history.
Documents required for personal loan balance transfer
- a completed application form with a passport-sized photograph that has been signed
- PAN card, passport, driver’s license, Aadhaar card, voter id card) are all acceptable forms of identification and proof of age.
- Proof of address
- Salary slips from the previous three months, as well as bank account statements from the previous six months
- Statement of loan to be transferred
One of the most efficient strategies to lower your personal loan‘s interest rate is to transfer your balance. However, in many circumstances it may not be the best option.
You should check with both your current and new lenders to see if the savings are substantial. It’s pointless to go through all of the paperwork and apply if you can’t save money by switching lenders.