Personal Loan Balance Transfer

Banks Offering Personal Loan Balance Transfer

NBFCs Offering Balance Transfer

Top-Up Loan and Balance Transfer

While doing a balance transfer to a new lender, you can also ask the new lender to offer you top-up on your new loan. When you opt for a top-up, you should choose a loan amount that that is greater than your outstanding balance. Your new lender will give approval for the loan if you fulfill the eligibility norms. The top-up amount will then be credited to your account by the new lender.

Let us understand that with the help of an example. Suppose you wish to transfer an outstanding balance of Rs.3.4 lakh to your new lender. In this case, you should apply for a loan of Rs.5 lakh. Once you do that, the new lender will transfer Rs.1.6 lakh to your bank account. The remaining Rs.3.4 lakh will be given to you as a cheque by the lender which you can use to repay the outstanding balance. This implies that after you do a balance transfer, your total outstanding will be Rs.5 lakh plus the interest.

Eligibility Criteria for a Personal Loan Balance Transfer

The eligibility criteria for a personal loan balance transfer is the same as for a personal loan and varies from lender to lender. However, the basic eligibility criteria that most lenders look for, have been given below:

Documents Required to do Personal Loan Balance Transfer

Though the documents required to do a balance transfer on your personal loan may vary from lender to lender, we have listed the basic ones for you below:

Illustration of How Personal Loan Balance Transfer Affects Your Repayments

If you have availed a personal loan, you should consider a balance transfer at least once during the loan tenure. This will lead to a reduction in your interest rates, consequently, empowering you to save on the interest that you must pay.

Let us understand this with the help of an illustration.

Suppose that you have availed a personal loan of Rs.3 lakh at an interest rate of 18% for a tenure of 36 months. In this case, your monthly EMI (equated monthly instalment) will be Rs.10,845 and the total interest you would be paying over the loan tenure will be Rs.90,446.

If, after 1 year, you do a balance transfer and the interest rate now is reduced to 11.29%, the principal outstanding on your loan amount will be 2,17,254. Your monthly EMI, in this case, will drop to Rs.10,115 and therefore, your total savings will stand at Rs.16,560. The same has been shown in the table below:

If you wish to calculate the amount you would save by doing a balance transfer on your personal loan, you can use the balance transfer calculator available on the official website of the respective banks that offer the balance transfer facility.

How to do a Balance Transfer on Your Personal Loan?

Transferring a personal loan balance entails moving your existing loan from one lender to another which has more favorable terms, usually with lower pricing or flexible terms.  

It is a good idea when: 

1. a new income is available, which will make it possible for you to commit to a higher loan payment each month or pay off the loan sooner 

1. the interest rate on the current loan is significantly higher than the second lender is offering 

1. you want to reduce total interest out-goings, pay the loan off sooner, or consolidate a debt 

1. Overall, a transfer of loan balances gives you the opportunity to evaluate your financial commitments, and repayment options for savings in the future.  

1. Options available for a balance transfer 

1. You can utilize either of the options below to complete a personal loan balance transfer. 

Option 1: Online Application  

Follow the steps given below to transfer personal loan online:  

1. Step 1: Go to the official site of your selected lender. 

1. Step 2: Go to the 'Personal Loan Balance Transfer' section, and enter a few details about your loan: the loan amount outstanding, tenure, etc. 

1. Step 3: Upload the scanned copies of whichever are required of: Salary slips or other income proof, identity and address proof, current loan status/statement from existing lender. 

1. Step 4: Submit for preliminary approval. 

Option 2: Branch Visit 

If you want to transfer your personal loan, you can follow these instructions: 

1. Step 1: Visit the branch of the bank (preferably nearest to you) offering the balance transfer facility. 

1. Step 2: Make sure you carry the necessary documents. 

1. Step 3: Meet a loan officer and discuss the transfer terms, including the interest rate, processing fee, and repayment options. 

1. Step 4: The bank will verify your documents and initiate the transfer process. 

1. Step 5: Once verification is complete, your new lender will close the existing loan with your previous bank and transfer the balance to the new loan account. 

Key Points to Consider Before Transferring 

Compare Interest Rates 

1. Begin by researching offers from multiple banks and financial institutions. 

1. Use official websites, online aggregators, or direct calls to customer service to gather information. 

1. Some banks don’t list rates online, so visiting a branch can help you obtain accurate details. 

1. Aim to identify a lender that offers a lower rate along with favourable terms like flexible repayment or top-up facilities. 

Estimate Your Savings 

1. Use an online balance transfer calculator to compare your current EMI and interest payments with those from the new lender. 

1. The calculator will show you the potential savings over the remaining loan tenure. 

1. Remember that a balance transfer is most beneficial if it reduces your total interest burden substantially. 

Check Processing Fees 

1. Most lenders charge a processing or transfer fee,typically a percentage of the outstanding principal. 

1. Calculate whether this fee offsets the benefits of switching to a lower interest rate. 

1. If the fee is too high, the transfer might not yield meaningful savings. 

1. Some lenders also include additional charges such as documentation fees or administrative costs, so review all applicable charges carefully. 

Read the Fine Print 

Before finalising, thoroughly review all terms and conditions. Pay attention to: 

1. Prepayment or foreclosure charges 

1. Eligibility criteria and credit score requirements 

1. Processing timelines and document verification steps 

Why go for a Balance Transfer on Your Personal Loan?

A personal loan balance transfer allows you to move your existing loan from one lender to another, usually taking advantage of lower interest rates, revised repayment terms, or enhanced loan features. It’s a strategic step to optimise your financial commitments and reduce overall borrowing costs. Here’s why opting for a balance transfer could be beneficial: 

Lower Interest Rates and Better Deals 

1. A new lender may offer a reduced interest rate, helping you save significantly on total interest payable over the loan tenure.  

1. Some banks provide special promotional offers, such as zero processing fees or discounted rates for balance transfer customers. 

1. Transferring your loan at the right time can help you cut costs and repay faster without increasing your EMI burden. 

Improved Repayment Capacity 

1. If your income has increased substantially, you can choose to pay higher EMIs and shorten your repayment tenure. 

1. This not only reduces your total interest outgo but also helps you become debt-free sooner. 

1. A shorter tenure also positively impacts your creditworthiness and future loan eligibility. 

Better Offers Due to a Higher Credit Score 

1. An improved credit score often qualifies you for better interest rates and favourable loan terms. 

1. If your score has risen since you first took the loan, switching lenders allows you to renegotiate terms and secure more flexible repayment options. 

1. Many lenders also offer pre-approved balance transfer offers to borrowers with excellent credit profiles. 

Add or Remove a Co-applicant 

1. A balance transfer can also be used to modify the borrower structure of your loan. 

1. You can choose to add a co-applicant (such as a spouse or family member) to strengthen your repayment profile or remove an existing co-borrower if no longer required. 

1. Lenders generally permit such changes only during a refinance or balance transfer process. 

Extend or Adjust Loan Tenure 

1. You can extend your repayment tenure to reduce your EMI burden, making monthly payments more manageable. 

1. Conversely, you may opt for a shorter tenure to clear your loan faster if your finances allow. 

1. This flexibility helps you customise repayment according to your current financial situation. 

Access to Additional Benefits 

1. Some lenders provide top-up loan facilities during a balance transfer, enabling you to access extra funds at the same or lower interest rate. 

1. You can use this additional amount for personal needs, business requirements, or debt consolidation. 

1. Balance transfers may also come with improved digital servicing, better customer support, and flexible repayment modes. 

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