If you require funds urgently, then one of the best ways would be to apply for a personal loan. A personal loan can be used for any purpose. Sometimes, after taking a loan from one lender, you might find that other lenders are offering better interest rates for personal loans. Alternately, you may find that your needs may not be met by your existing lender in terms of branch presence, top-up facilities, customer support, etc. In such cases, it might make sense to opt for a personal loan balance transfer facility. It helps to reduce the burden of EMI and at times, may also help increase the total repayment tenure. Let’s understand how it works and how to transfer a personal loan.
It is a process through which you can transfer the outstanding personal loan amount from your existing lender to a new lender at more attractive terms. A Personal loan balance transfer is mainly done to avail the benefit of the lower interest rate on the outstanding loan amount and reduce the EMI.
In brief, in a personal loan balance transfer process, you take a new instant personal loan at a lower rate to pay-off the existing loan and start servicing the new loan with reduced EMI. The loan transfer process will involve foreclosure charges and processing fees which will be added to the outstanding loan amount.
Not only you can get a lower interest rate on personal loan balance transfer, there other benefits too, that includes:
The first step involves making inquiries in the market about the availability of balance loan transfer schemes and the best rates offered. You have to check the details of the scheme offered by various lenders and decide accordingly. For example, a new lender may offer you reduced EMI but give you a longer repayment tenure. This may look attractive at a first look, but drives no value and only increases the total amount needed to be paid.
Examine and calculate the processing fees, foreclosure charges, stamp duty and other charges needed to be paid for exercising the personal loan balance transfer facility. Compare all the charges and benefits of the loan transfer facility and check whether it will be profitable for you or not.
The lender always goes through your credit report and repayment history of the existing instant personal loan, tenure left, total outstanding amount, and the existing rate of interest before suggesting the new term of the loan.
After careful analysis, if you find the whole exercise profitable, you can start the application process and proceed to submit the documents required for personal loan transfer.
You need to take a no-objection certificate and a foreclosure letter from the existing lender.
The following documents are required for personal loan balance transfer:
For Business Professionals/ Self Employed
After the sanction of the loan transfer application, read the fine prints of the loan document carefully and the benefits offered before signing the new loan documents.
Following the execution of the loan document, the new lender will now issue a cheque/demand draft in favor of the previous lender for the outstanding personal loan amount.
Once the previous lender receives the payment for the outstanding loan amount, they will close the personal loan account and issue the foreclosure certificate, which you need to submit to the new lender.
Must Read: Different Types of Personal Loans in India
The key to successful management of your personal loan account is controlling the interest cost of the loan. While a personal loan balance transfer facility can considerably lower your interest cost and reduce the EMI burden, you should carefully analyze all the pros and cons and financial implications before exercising this facility.