Are you having a rough time managing your personal loan instalments? If yes, then you can’t go back in time to undo the choices you made; however, you can still make your situation better with personal loan balance transfer. If you haven’t heard the term before, well, it’s time that you do!
Personal Loan Balance Transfer
Personal loan balance transfer is similar to any other balance transfer facility. It is an opportunity to transfer your outstanding personal loan amount from your current bank to a new lender. Almost all banks in India allow their customers to transfer their personal loan outstanding balance to other financial institutions.
So if you’ve been paying monthly instalments of a personal loan and you get a lucrative balance transfer option, which offers you lower rate of interest and/or top-up amount, what will you do?
At times when people come across such an attractive offer, they find it difficult to refuse. But do you think accepting the offer instantly is the right thing to do? Not really.
A decision taken in haste can later make you regret. Therefore, an individual in such a situation must always first assess the offer. They must evaluate whether the offer suits their requirements or not and then decide.
To help you take an informed decision, we have compiled a list of personal loan balance transfer factors that you must consider when choosing a personal loan balance transfer offer.
Benefits to apply for Personal Loan Balance Transfer
Some of the many benefits of applying for personal loan balance transfer are listed as follows:
• To get a higher rate of interest
At times, people take personal loan at a high rate of interest on the basis of their then salary/income or company. But with time as they grow in their profession and improve their financial records, lenders might want to offer personal loan at a lower rate of interest. If you ever come across such an opportunity, you will always have an option to transfer the outstanding amount of your personal loan.
• To enjoy better services
Better service is yet another reason why you must consider loan balance transfer. If you are dissatisfied with the current lender’s services and are getting better services from another lender, then loan balance transfer can be your second chance to enjoy services offered by the new lender.
• To add additional amount
There are times when people don't get the desired loan amount sanctioned from the bank due to their then credit profile. But with time if you have improved your credit profile, there are chances for lenders to offer you balance transfer with an option of top-up loan. If you are in need of more money and come across such an opportunity, don't reject it right away. This is because a top-up loan is a better option than taking a new loan for additional money requirements. Loan balance transfer gives borrowers an option to increase the loan amount while changing their lender.
Now that you are aware of the benefits personal loan balance transfer comes with, it is essential for you to have brief idea about the prevailing interest rates that you get offered by any lending institution. Here the interest rate and the top-up amount offered are not the only factors that you should take into consideration. There are a lot other factors that you must know to get the best out of the facility. Here, we are going to go through a few factors that will help you make an informed decision for loan balance transfer.
Important Considerations for Personal Loan Balance Transfer
With the help of loan balance transfer you get another chance to move from your current rate of interest to a lower rate of interest on your personal loan. But one must make such a move after careful consideration. There are several factors that must be looked into before getting a personal loan. To ensure that you do not miss out on any one of the considerations, we have listed them below as follows:
1. Evaluate the total cost benefit
One thing we all must be clear about is that banks are no generous donors. Therefore no matter how alluring a balance transfer offer is, one must look at it from all perspectives, evaluate all possibilities and then make a decision. The loan officer of your new bank will try to lure you by decreasing your loan EMIs and increasing your loan tenure but you must not easily fall for it. You might think that such benefits will reduce your loan liability but in reality it will increase the total amount you will have to pay to the new lender.
Due to the increase in the loan tenure, EMIs will decrease but the interest amount will increase. If you’re paying higher EMIs with your current lender and do not require extra money, then you should stay with your existing lender, increase the EMI to finish off loan as soon as possible. If you want to assess the total outgo of both loan offers from both current and new lenders, you can use an online balance transfer calculator.
2. Consider other fees/charges
Interest rates are not the only charges applicable when you take a loan or transfer it from one bank to another. For personal loan balance transfer pre-closure penalty is what must be considered. This fee, generally, ranges from 1-5% per annum of the principal outstanding amount. Processing fee is another charge that your new bank may levy for processing your loan transfer request. Before making the final call on loan transfer, consider all these costs as an extra expense. Doing so will help you make an informed decision.
3. Read between the lines
This is yet another important consideration for people who are considering personal loan transfer options. You must always read personal loan balance transfer related documents carefully. If you are not able to understand the documents, you can take help of your relationship manager to further clarify on the terms and conditions. Last but not the least; ensure that you don’t miss any of the hidden charges as they may increase the outstanding loan amount.
4. Carefully examine the additional benefits offered
To attract more customers for personal loan balance transfer, banks may offer extra frills such as personal accident insurance. Don’t be easily impressed by such offers. Analyse them carefully along with their terms and conditions. After thoroughly examining and weighing the pros and cons of the benefits, think if you really require those offers or not.
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