A personal loan is often the go-to solution in the time of crisis. Be it a medical emergency or some other urgent financial need, most people apply for a personal loan without much research because of the time crunch and limited financial knowledge. As such, they might end up with a loan that charges heavy interests. Also, in some cases, you get a loan with high interest if your credit score is poor or your income is not stable. But over the time both of these parameters might improve, making you eligible for a lesser interest rate. In such situations, you may apply for a loan transfer to a new lender who would offer you a better interest rate.
Nowadays, with the help of personal loan balance transfer, you can transfer your loan to a different lender and take advantage of cheaper interest rates and superior services. You can do so by maintaining a good credit score and a proper repayment history on your previous loan.
A personal loan balance transfer works just like a personal loan and does not call for any security or collateral. You just have to pay for the foreclosure fees to your current lender and a nominal loan transferring fee to your new lender, and you are done! In this post, we have mentioned everything you need to know about how a loan transfer works so that you are well-equipped with all the information before you begin the process.
What Is a Personal Loan Balance Transfer?
The procedure of switching your personal loan balance from one bank or lender to another is known as a personal loan balance transfer. The two main reasons for choosing a loan balance transfer are to save on interest and to receive an extra loan on your present loan amount. When you are still early in the loan term, a balance transfer is an excellent choice. To be sure that the balance transfer is saving you a significant amount of interest, you must perform a cost-benefit analysis. The borrower does not need to provide security for the loan transfer process. The loan can be transferred with only a small transfer fee.
Perks of Transferring a Personal Loan Balance to a New Lender
Here are some of the advantages of transferring a personal loan balance to a new lender.
- Reduction of Rate of Interest: The first benefit of a Personal Loan balance transfer facility is a reduction in the rate of interest. The interest rate on the new loan is much cheaper with the new lender this makes repayment much easier and your loan less costly.
- Enhanced Features: This advantage is based on your history of on-time payments, your CIBIL score, and the dynamic nature of your income. Some lenders could provide more opulent features like no processing costs, a cheaper loan rate, waiving the last EMI, and so on. By using the personal loan balance transfer option, the borrower may not only lower their monthly interest payments but also benefit from improved loan terms.
- Loan with a new term: The current personal loan’s term may be negotiated when it is transferred from one bank to another. Depending on your needs, you can request an extension or reduction in the loan’s payback time. Accordingly, there is a rise or fall in the EMI and interest load.
- Apply for a Loan Top-up: Many lenders provide additional personal loans to borrowers who transfer their existing loans. Therefore, a personal loan balance transfer option would help current borrowers of personal loans who are unable to get further loans or who are being charged higher rates of interest for doing so.
How Does a Personal Loan Transfer to a New Lender Work?
The procedure for a loan transfer to a new lender is quite simple. When you transfer the balance of a personal loan, the new lender pays off the old loan. All you have to do is simply shut your loan account with the current lender and pay a transfer fee to your new bank to complete the loan transfer procedure. You will also be responsible for paying the processing costs for your new loan. Now, just like your previous cash loan, you have to make payments to the new lender in equal monthly installments at a new interest rate once your new bank pays off the old debt.
More Information on Personal Loan Transfer
To give extensive information on personal loan transfer we have provided a few more important aspects of a loan transfer. Here are some of the important factors to consider before the personal loan transfer –
- Analyse the new offer: You must determine how much you will have to pay and how much you may save by transferring your balance. You can take the help of the personal loan transfer calculator which is easily accessible on the lender’s app or website.
- Take a thorough look at the terms and conditions: Before agreeing to the terms of a personal loan balance transfer, it’s critical to be informed of all the loan’s conditions. To be aware of important aspects and any potential hidden fees associated with the transfer, you must carefully read the loan transfer agreement’s the fine print.
- Make choices according to your needs: Only take into account the balance transfer option if it satisfies your particular needs. Top-up loans and a number of other elements of the balance transfer facility might not always meet every customer’s needs. In these situations, it is prudent to analyse the offer, taking into account both its immediate and long-term implications.
- Additional costs involved: As we already mentioned, there are costs associated with transferring a personal loan from one bank to another. Foreclosure on the personal loan may incur costs from the current lender, and the new lender may impose processing fees for the amount transferred. When analysing the advantage of the balance transfer facility you must stay vigilant and take all of these expenses into account.
Eligibility criteria for loan transfer
Here are the eligibility criteria for a loan transfer
- You must be a citizen of India
- Your age should fall between 21 to 58
- You must have a stable monthly income of at least 15,000 every month.
- You must have an existing personal loan
- You must have six months of job experience if you are a salaried individual and 2 years of experience if you are a self-employed individual
- You must have a clear repayment history
Your EMI load might be greatly reduced with a personal loan balance transfer. Since there is a lot of competition among lenders nowadays, choosing the best loan app, interest rates, and enhanced terms or conditions could help you save big on your interest pay outs. You might be required to pay such fees if the current loan you have contains a prepayment clause. The savings from the reduced interest rate can, however, more than make-up for these costs when you take them into account.
To ensure a streamlined process, we urge you to make timely repayment of your cash loan and maintain a good credit history.