If you have borrowed a personal loan from a financial institution, you will naturally look to reduce the interest burden and lower your monthly instalments. But how? Refinancing of personal finance, also called loan balance transfer holds the solution.
What is a loan balance transfer?
Personal finance (loan) balance transfer allows a borrower to transfer the loan’s outstanding principal amount from one lender to the other. The process enables the applicant to benefit from a lower personal loan interest rate on the due loan balance. Various lending institutions offer balance transfer on personal finance. However, borrowers must assess the balance transfer to ensure that it will reduce their borrowing cost before choosing one.
A balance transfer can help make your EMIs more pocket-friendly. The process does not entail collateral or security deposit from the borrower. Some charges including foreclosure from the current lender, stamp duty (if applicable) and processing fee from the new lender may be charged.
Before applying for a balance transfer, make sure to check your eligibility for the same. The criteria primarily depend on borrowers’ ability to repay the loan amount and their overall credit health or creditworthiness.
Nowadays, personal loan eligibility calculators allow applicants to review their eligibility for transferring their outstanding loan balance. Some primary conditions that require fulfilment for a balance transfer of personal finance include:
- For initiating the balance transfer procedure, your current outstanding loan balance must be a minimum of Rs 50,000.
- A minimum of the last twelve instalment pay-outs for the existing loan is checked. Your record of EMI payments must be clean and free of defaults.
- A good CIBIL score is required, preferably 700 or more.
- One or more credit card/another loan should be in good standing as per the new financial institution’s conditions.
Here’s a guide to understanding the procedure of personal finance balance transfer to avail lower interest rates:
- Assess the current interest rate you can receive on your personal finance with various lenders to compute the total interest savings.
- Estimate the approximate cost of the balance transfer process factoring in foreclosure, processing, and other charges that will apply.
- Examine the net benefits to finally decide if you want a loan balance transfer or not.
- Now, shortlist financial institutions that you may opt to transfer your existing personal finance.
- Compare different personal loan interest rates offered by the lenders, applicable charges, your loan amount eligibility, and their balance transfer procedure.
- After a new lender, borrowers must apply for a foreclosure letter and a NOC (No Objection Certificate) from your existing (current) lender.
- Get started with the application procedure, furnish the required loan documents, and previous repayments’ record.
- Avail a sanction letter and complete the loan agreement with your new financial institution.
- Get the disbursement of the outstanding loan balance, from your current lender through DD/cheque in favour of the preceding financial institution.
- After this, your previous lender will cancel your ECS and cheques and shut down your personal loan account.
There you go! The Ins and outs of transferring your personal loan to a lower interest rate. Should you wish to know more, scour the internet for further details on lenders offering low-interest rates on personal credit.
