A personal loan (kind of unsecured loan) availed by individuals on the basis of some criteria, employment histories, such as level of income, credit score, and scope for repayment. While sanctioning the loan the lender provides all the loan terms like loan amount, interest rate, and repayment tenure.
The personal loan is a great tool to finance all your necessary emergencies, by converting the total loan amount into smaller monthly EMIs.
What is a Personal Loan Balance Transfer?
The process in which the borrower transfers his/her outstanding personal loan amount from one lender to the other, offering a lower interest rate, is known as personal Loan Balance Transfer This facility is not just for personal loans but other loans like auto, home, etc too.
How does Balance Transfer work?
In the case of the personal loan balance transfer, the new lender repays the loan amount to the old lender. You will also have to pay extra charges levied on the prepayment clause. Along with this, the borrower has to pay the processing fee for the new loan. However, all of this compensated by the lower interest rate being charged.
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What are the benefits of Bank Transfer?
Bank transfer is a great opportunity to refinance your loan and get access to better loan terms for a different lender. Some of the benefits of a personal loan balance Transfer include:
- Interest Rate Benefit: one of the major benefits that borrowers can avail with a balance transfer is the lower interest rate, thus reducing the financial burden through EMIs. For this, it is important to first check with the new lenders and know the interest rate being offered by them. You should evaluate the offer, compare rates and then go ahead with the balance transfer.
- Extended Loan Tenure: Transferring the personal loan will extend your loan tenure. You can also try to negotiate the loan terms with the existing personal loan. The extended tenure will reduce your monthly EMIs but might increase your interest.
- Enhanced Features: Depending on your repayment history and the corresponding credit score build-up, you can negotiate with the lender for better loan features like a waiver of the last EMI, zero processing fees, lower interest rates, etc. These facilities will help reduce your interest burden and allow you the opportunity to enjoy better features.
- Top-up loan Facility: Along with the Loan balance transfer, most banks also offer a top-up loan facility. These come at a very competitive and lower rate of interest.
These are some of the benefits of a personal loan balance transfer, but you must evaluate all the terms and conditions before opting for the service.
Factors to consider while taking Balance Transfer :
- The cost involved: While the balance transfer may offer you low interest, it is important to evaluate the total cost involved including fees, charges. Apart from that, you must also check for the charges that the previous lender might charge for early repayment.
- Evaluate the new offer: It is necessary to check for your new offer, the amount you need to pay, and how much you can save with the balance transfer.
- Offer vs Requirement: What is of utmost importance is if your requirement is being fulfilled with the balance transfer. Top-up loans and many other features of the balance transfer facility sometimes does not suit the requirement of all customers. You can check with the lender and ask ‘how much loan can I get’
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While the process is very lucrative, not many borrowers avail of this service. A balance transfer is a better way to re-evaluate your loan and get the chance to reduce the interest rate.
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