Personal Loan Balance Transfer

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      Personal Loan Balance Transfer

      Features of Personal Loan Balance Transfer

      • Lower Interest Rate: One of the key features or benefits of the transfer of a personal loan balance is that it also provides a better/lower interest rate. A lower rate of interest on the loan transfer would normally be offered by the new lender.
      • Longer repayment period: Balance transfer often also helps you to renegotiate the terms of the loan, such as having your loan repayment tenure extended by the new lender. The monthly EMI pressure will be minimised by this.
      • Additional features available: You can get an offer from other lenders for better loan features such as waiver of last EMI, zero transaction fees, lower interest rates, etc. depending on your past payment record and changing income dynamics.
      • Top-up Loan Facility: Together with a personal loan balance transfer, many banks allow a top-up loan facility. If the borrower wants more credit, it is also possible to consider opting for a balance transfer. At a favourable and comparatively lower rate of interest, many lenders or financial institutions may provide top-up personal loans.
      • Great Services: Personal loan balance transfer most often helps you to receive better services if the services provided by the current lender or financial institution are not happy with you.

      Eligibility Criteria for Personal Loan Balance Transfer

      For the balance transfer of personal loans to most banks, some common conditions that apply include:

      • To start the balance transfer process, the current unpaid loan sum has to be at least Rs. 50,000.
      • The previous record of loan EMI payment record must be clean. It will review at least the previous twelve instalment payouts of the current loan.
      • In good faith, one or more additional loans/credit cards according to the new lender or financial institution’s requirement.
      • CIBIL Score, usually 700 or above, as required by the bank.

      Documents Required for Personal Loan Balance Transfer

      Some common documents that may be needed to be submitted by the borrower if he or she wishes to opt for a transfer of balance are as follows:

      • Properly signed application form for the transfer of personal loan balance along with passport size photograph.
      • Address Proof (Aadhaar Card/Passport/ Landline Bill/ Latest Electricity bill/Rent agreement etc)
      • Age Proof (PAN card/driving license/passport/voter ID/Aadhaar Card, etc.)
      • Identity Proof (PAN card/driving license/passport/voter ID/Aadhaar Card, etc.)
      • PAN Card copy (Mandatory)

      The following are some of the main documents that are unique to salaried and self-employed people:

      For Salaried Individuals:

      • Salary slip of last 3 months
      • Bank statement of last 6 months
      • Personal loan statement from a current lender (for the loan that has to be transferred)

      For Self Employed Individuals:

      • TAN Card/GST number
      • The last 6 months of individual and business entity bank statements
      • Balance sheet for the last 3 years along with business benefit and loss statements
      • Current lender’s statement of a personal loan (loan information that needs to be transferred)

      Process of Personal Loan Balance Transfer

      Personal loan balance transfer process includes the following steps:

      • Confirm the present interest rate with other lenders that you can get on your personal loan and measure the interest savings.
      • Calculate the expected cost of the transfer of the loan, taking into account the different charges and fees that might apply.
      • Evaluate the net advantages and finalise whether or not you want to opt for the shift of the balance. Shortlist a few creditors to whom you may want to transfer your current loan.
      • Compare the personal loan interest rates provided by the lenders shortlisted, the eligibility of your loan amount and their loan procedure.
      • After you finalise the new lender and plan to continue with the transfer, request your existing lender for a NOC (No Objection Certificate) and foreclosure letter.
      • Start with the new lender in the application process. Send the records of the loan along with the full record of repayments.
      • Receive a letter of sanction and conduct the new loan agreement with the new lender.
      • Take a disbursement from the new lender by cheque/demand draught in support of the previous lender.
      • Once the previous lender collects the unpaid loan sum, all the cheques and ECS will be cancelled and the personal loan account will be locked.

      Personal Loan Balance Transfer Charges

      Depending on your current bank and the new bank, the charges involved in moving the unpaid balance of your existing personal loan to a new lender can vary. The foreclosure charges that you need to pay to your current lender and the processing fees that you need to pay to the new lender are two important charges involved in a personal loan balance transfer.

      • Foreclosure costs: In order to take over your personal loan, foreclosure charges ought to be charged to the current lender. With different lenders, the rate can vary from zero to up to 4% of the principal outstanding. However, depending on the loan agreement, some lenders may charge a flat fee or a higher charge.
      • Processing fees: This must be paid for the processing of your personal loan request (on transfer) to the new lender and can range from a flat fee of Rs. 500 to 4 per cent of the value of the loan.

      Calculation of Personal Loan Balance Transfer

      If you opt for a balance transfer, you can use any of the free personal loan balance transfer calculators available online to measure the monthly EMIs and the cumulative interest payable. If you opt for a balance transfer, you will equate the interest due on your current loan with the interest payable.

      Illustration of Transferring Balance of Personal Loan

      An example of how a personal loan balance transfer could help you save on the total interest payable is given in the following table:

      Particulars Existing Loan New Loan
      Remaining Loan Tenure (months) 36 36
      Outstanding Balance Rs. 3 lakh Rs. 3 lakh
      Interest Rate (p.a.) 15% 11%
      Monthly EMI Payable Rs. 10,400 Rs. 9,822
      Difference in EMI Payable Rs. 578
      Total Interest Payable Rs. 74,386 Rs. 53,578
      Total Savings Rs. 20,808

      List of Providers Offering Personal Loan Balance Transfer

      Banks and NBFCs Balance Transfer Interest Rate
      Axis Bank 12% onwards
      HDFC Bank 10.75% onwards
      Indusind Bank 11% onwards
      Private Bank 11.25% onwards
      State Bank of India 10.35% onwards
      Kotak Mahindra Bank 10.75% onwards
      Citibank 9.99% onwards
      Tata Capital 10.99% onwards
      Bank of Baroda 11.40% onwards
      Fullerton India 12% onwards

      What is Personal Loan Balance Transfer?

      The transfer of personal loan balance is an opportunity for the borrower to transfer his loan from one bank to another to take advantage of the lower interest rate offers and get a loan top-up. The two key reasons for taking personal loans are to save interest and get extra loans on your current loan sum as well. The decision to move your loan depends on the cost of your current loan.

      The Balance Transfer personal loan does not require the borrower to have any collateral. The current lender will, however, charge some foreclosure charges, and if necessary, the new lender will charge a processing fee along with stamp duty for the loan agreement. Include these costs as well when determining the best deal for a balance transfer.

      Savings on Personal Loan Balance Transfer

      Assume that you have a current outstanding personal loan balance of Rs 2 Lakh for a 48-month term. At the lowest interest rate on personal loans, you can move your current personal loan to a new bank. Your EMI can decrease from Rs 5,516 to Rs 5,116 by transferring a 4-year personal loan of Rs 2 Lakh from 14.5 per cent to 10.45 per cent. Total interest savings after balance transfer is Rs 19,188.

      Important Aspects

      • You should always compare the various choices available when opting for a balance transfer on your personal loan.
      • You can measure the exact interest payable by making use of one of the free online personal loan balance transfer calculators using the loan terms that your new lender gives you.
      • Bear in mind the extra expenses that you will have to face when considering moving your personal loan balance to a specific lender.
      • Make sure you carefully read the fine print to be aware of the loan terms before signing the personal loan balance transfer agreement.
      • Only if it fits the specific requirement can one take the personal loan balance transfer service.

      FAQs

      If I apply for the personal loan balance transfer, what is the repayment tenure?

      The period of repayment will vary from 12 to 60 months.

      When should one opt for the personal loan balance transfer?

      If relative to other lenders on the market, your lender charges a higher interest rate on your personal loan, you will consider opting to move your personal loan to another lender for a balance transfer. It is also possible to choose a personal loan balance transfer to use better terms on your personal loan, such as top-up facility, longer repayment tenure, etc.

      What are the expenditures involved in the personal loan balance transfer?

      At the time of the transfer of the outstanding balance of their current personal loan, the borrower will have to pay the following fees and charges:

      1. Fees to the new lender for processing.
      2. Foreclosure payments or the current bank’s prepayment fee.
      3. Stamp duty (if applicable) on a loan agreement.

      Who can get the personal loan balance transfer facility?

      Any borrower who has a current personal loan on which at least 12 EMIs have been paid on a regular basis is entitled to transfer the unpaid balance to another lender, given that the personal loan eligibility conditions of the lender are met.

      By applying for a personal loan balance transfer, can I get more money?

      Yeah, some lenders offer the option of using a top-up on the current persona to customers; loan when opting for a balance transfer. Top-up helps clients to borrow more cash over and above their present loan. Together with a balance transfer, applying for a top-up helps you to use more money and more time to repay it at lower than previous interest rates.