Getting your personal loan balance transferred to a different lender is not that really different from applying for a fresh loan. If you are wondering how to go about balance transfer the right way, start by assessing your need to switch to a new lender.
There are no short cuts here as you will be taking a new personal loan from another lender, but usually for a lower amount and at a lower interest rate. You still have to shortlist lenders who offer balance transfer loans, verify the reputation of the lenders, compare interest rates and other terms and conditions before you decide on the new lender.
Opting for a Balance transfer can help you:
- Get out of debt faster
- Avail affordable EMIs
- Save Money on Interest
- Source additional funding
If you wish to accomplish one or more of the above objectives, getting the personal loan refinanced could prove rewarding.
How to Transfer Personal Loan Balance?
Check if you are eligible to avail of a balance transfer offer. Banks and other financial institutions usually feature details of loan products, eligibility criteria, documentation requirements, etc., on their company websites.
If you are unable to find the information or have any further queries, contact the lender via phone or in-person to get the details.
The amount of pending debt and track record of repayments are a couple of key criteria that influence eligibility.
You must take time to verify if you are required to comply with any specific prerequisites in order to avail of balance transfer offers. When getting your personal loan refinanced by another bank, it is common for the bank to expect you to open new savings account with them, preferably with net banking facilities to enable automatic credit/debit transactions.
In some cases, lenders make it mandatory for you to purchase some form of insurance or apply for credit cards in order to get refinancing.
You may also be offered a top-up loan along with the balance transfer deal, but it is usually optional and not compulsory. Get a clear idea of the mandatory pre-requisites and avail the offer only if you need those additional features.
Compare Interest Rates
You must anyway compare interest rates if you wish to really benefit by moving your loan balance to another lender. Opt for the balance transfer deal that offers significantly lower interest than what you are currently paying.
Interest difference must be at least over 1% to ease the financial burden as there are other expenses you will need to bear when transferring the outstanding debt.
Calculate Balance transfer Expenses
Do a detailed cost-benefit analysis before you sign up for a balance transfer offer. Depending on the size of outstanding debt and remaining loan term, foreclosure charges will be levied by your current lender, while the new lender is likely to charge a fee to process the balance transfer loan.
Factor in any additional charges that may add to the cost of getting the loan refinanced. Online balance transfer calculators and comparison sites make the job easier and speedier.
Do remember that service charges are also applicable.
Keep Documents Handy
With loans being processed quite speedily in recent times, it is important to keep a copy of proof documents handy to avail of a balance transfer loan.
Copies of address and identity proof documents, salary slips or account statements to account for steady income, PAN / TAN card, and passport size photographs are usually submitted along with the loan application.
Make it a point to check what documents are acceptable as proof.
Get Outstanding Debt Transferred to New Lender
Once you have shortlisted your new lender and are satisfied with the terms and conditions of the balance transfer deal, it is time to initiate the actual process of transferring the debt.
You must obtain a quotation from your current lender that details how the personal loan has been serviced till date; Details will typically include:
- the original loan amount, term and interest rate
- equated monthly installments paid till date
- penalties/charges incurred, dues if any
- the final outstanding debt which is payable to the lender
- foreclosure charges
Using this quotation and along with other documentation needed for a balance transfer, apply for a fresh loan with your new lender. You can apply for a balance transfer loan online or in person.
In the meanwhile open a new bank account for the refinanced loan based on lender-specific instructions.
You will need to fully settle your personal loan with the previous lender and there are two different ways to pay up the debt. You may either request your new lender to directly take over your debt and settle the loan or get the amount credited your own account and you personally foreclose the loan.
Check the available options with your lender before submitting your balance transfer application.
Your balance transfer loan amount (with or without top-up funding) will be available after your previous loan is foreclosed and a new loan application has been processed.
The process of a personal loan balance transfer is simple and hassle-free especially when you team up with a reputed bank or financial institution. You will, however, need to shop around for the best deal, compare costs, evaluate benefits and more important your requirements before you opt to switch your loan balance to a new lender.
Getting your personal loan refinanced earlier in the tenure is the ideal way to reap financial benefits, especially if your lender offers you a compellingly low-interest rate. However, steer clear of balance transfer deals that are too good to be true for you will not be able to partly pre-pay or fully foreclose such loans!
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