Struggling to pay your personal loan installments with the current interest rates?
When managing a personal loan, with the existing interest rates becomes a big concern for your financial set-up, Balance Transfer can be your way out.
Just like you look for best deals on other services, a personal loan with best interest rates should be opted after comparing the rates with different lenders.
If the current lender is charging a significantly high rate of interest on the loan, you can opt for the personal loan balance transfer, to reduce the burden of debt.
This process of transferring the loan with the existing lender to a new lender mainly because of lower interest rate is termed as “Personal Loan Balance Transfer”.
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Things to consider before you transfer your loan
- Outflow of debt amount – If after all the calculations, the amount to be paid, whether in terms of interest rates or of tenure, then there is no logic in transferring the loan. Consider the tenure period while transferring the loan account with the new lender. Interest rates might get reduced but a longer tenure implies more amount to be paid out to the lender.
- Taking a good look at the fine print – Make sure you read the fine print of the loan agreement carefully before signing the loan agreement. It will save you from the potential pitfalls which you might face in future. The introductory rate which the bank offers lasts for a predetermined period of time, usually for six to 18 months after which it goes up.
- Fees and Charges –A processing fees has already been paid by you with your first lender, and if you will again have to bear the fees with the new lender, it is important to analyse is it really worthy of transferring the loan. Therefore, it is critical to understand the fees and charges, which will have to paid out in transferring the loan.
Documents required to furnish for the Personal Loan Balance Transfer
For Salaried:
- Identity Proof- Aadhar Card/Valid Passport/Voter Id/Driving License.
- Address Proof- Aadhaar Card/Electricity Bill/Rental Agreement/Passport.
- Last 6 months bank passbook or bank statement.
- Last 3 months salary slip or current salary certificate.
- Latest form 16
For Self Employed :
- PAN Card- Of Firm, Company or an Individual.
- Identity Proof – Aadhaar Card/Passport/Voter ID/Driving License/PAN Card
- Address Proof- Aadhaar Card/Passport/Driving License/Voter ID.
- Last 6-month bank statement.
- Latest Income Tax Returns along with Computation of Income, recent Balance Sheet along with Profit and Loss statement, certified by CA.
- Business Continuity Proof.
- Other business documents include – Certified copy of Memorandum of Association and Board Resolution, Sole Proprietorship Declaration or Certified copy of Partnership Deed.
How to transfer the existing loan to a new lender
When you have figured out the new rates and other features with the new lender for the balance transfer, follow these below steps to process your loan account:
- Apply for the closure of loan account with the existing lender.
- Pay the foreclosure charges to the current lender and obtain a NOC.
- Approach the new lender and apply for the transfer of loan, by submitting the necessary documents.
- Submit the past loan track record and NOC from the previous lender.
- Sign the new loan agreement and the loan sanction letter.
- When the new lender disburses the loan, deposit the cheque or DD for the current outstanding amount, with the new lender.
- When the outstanding amount is received, the ECS and cheques will be cancelled by the previous lender and the loan account will be closed.
When you should consider for a balance transfer of the personal loan?
- The savings are less as compared to the charges: Only the lowered interest rates may not be a good deal to proceed with as other charges of foreclosure and processing might make up for the decrease in the EMIs. After paying off all the charges, if the amount saved is considerable, then a balance transfer is a viable option. A thorough analysis of all the charges should be done before finalising the balance transfer.
- If there are minimal foreclosure and transfer charges – If possible, you can delay the decision of loan transfer till Festive season. It is a great time when the lenders usually come up with attractive deal on loans. You can grab the deal, at your advantage, and save on the monthly outflow of instalments. Along with interest rates, processing fees and foreclosure charges are also reduced in order to gain the consumer base. You can save a bigger amount by paying off the extra charges also.
- When the interest rate of the current lender is significantly high: If you are paying a higher interest rate on your personal loan, which the other lender is offering at a significantly low rate, then you should consider to make a move. It makes an absolute sense to compare the personal loan interest rates of various lenders.
- Flexibility in tenure or other features – After taking the personal loan, you are promoted to a good role, with a good hike in payment. You wish to part pay the loan amount and your current lender is not agreeing to your request, you can plan for a balance transfer.
- When the loan is in initial stages : A balance transfer is a great opportunity to save on the cash outflow, when your loan account is in the first phase. A balance transfer will not be beneficial if it is done towards a later stage, because a greater part of EMI goes towards interest payment during the beginning years.
- Take advantage of the employment scheme: These features of schemes can work for you, if you are associated with such firms. If you are working with a reputed firm, lenders provide special interest rates to them. Similar is with self-employed individuals, where professionals like CA, Doctor, Architects are at advantage to avail such schemes.
To make personal financing decisions easy and transparent, fintech platforms allow individual access, shop for, and compare financial products and services provided by multiple banks and non-banking financial institutions with a few clicks. So, sitting at home, individuals can shop for the best financial product from the best lender at a single place. Again, if anyone has ended up with personal loan at a high interest rate, he can do personal loan balance transfer to another lender.
You can take the leverage of stiff competition in the market, which can be in your favour, if you are not satisfied with your existing lender.