The concept of balance transfer basically involves transferring the outstanding principal loan amount from one financial institution to another to get better loan terms such as reduced rate of interest. Thus the prime motive for a personal loan balance transfer is to reduce the overall burden of debt. Firstly, this concept was started with credit card balance transfers. But, this process of loan balance transfer is now extended for almost all types of credit facility such as home loan, auto loan, education loan and personal loan etc. Hence, most financial institutions currently provide the option of a personal loan balance transfer too.
Personal loan balance transfer is a process by which a customer transfers his/her total outstanding personal loan amount from one lender to another one that is offering a lower interest rate on the outstanding loan amount. One needs to carefully evaluate the balance transfer offer and choose the best one to save on the total interest payable. Personal loan balance transfer process does not require any security or collateral to be provided by the borrower. Some of the nominal cost that the balance transfer of personal loan involves may be the foreclosure charges that are levied by the current lender, processing fees that may be charged by the new lender, and stamp duty on loan agreement, if applicable.
|Existing Loan||New Loan|
|Balance Outstanding||Rs. 2 Lakhs||Rs. 2 Lakhs|
|Rate of Interest (ROI)||14.5%||11.49%|
|Loan Tenure Remaining (months)||48||48|
|EMI||Rs. 5,516||Rs. 5,217|
|Monthly Reduction in EMI||-||Rs. 299|
|Total Savings : Rs. 14,340|
Being a borrower, one needs to meet certain key eligibility criteria to avail the personal loan balance transfer facility. Eligibility in case of personal loan balance transfer is mainly dependent on the borrower’s capacity to repay and his/her credit worthiness or credit health. The personal loan eligibility checker available online can also help potential borrowers know their eligibility to transfer their personal loan balance. Some common criteria that hold true for most banks include:
Based on the documents submitted, the lending bank will carry out a credit worthiness assessment process as per their applicable criteria. Balance transfer will be carried out only after the assessment of credit risk has been made and the prospective borrower clears the assessment criteria.
On a closing note, balance transfer facility can benefit borrowers through reduced total interest burden and overall savings over the long run. The process of personal loan balance transfer may take only a few working days with minimal documentation. With the reduced interest rate burden and increased income level over the time, it would become easy for borrowers to repay the loan sooner. Personal loan balance transfer can be profitable facility when it is utilized after a careful analysis and evaluation of the balance transfer offer.
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