Balance Transfer Of Loan
How does Balance Transfer work? What is it precisely?
We all dread paying high-interest rates over loans taken from the banks and always looking for ways to increase savings. Balance Transfer of loan or credit card outstanding or any other type of loan is the process that allows the borrower to benefit lower interest rates offered by other lenders. Like if the borrower has an existing outstanding of home loan with one lender, they can make a home loan transfer which is to shift the remaining outstanding loan amount to a different lender who charges a lower rate of interest and hence lower EMI in future.
Some key features of Balance Transfer are:
- Reduction in Interest Rates - Benefits of balance transfer are manifold. One of the best features is the lower interest rate. A new bank will generally offer lower rates which help in reduction of EMI amount and the total interest liability
- Longer Tenure - Balance transfer helps us to renegotiate the loan terms with a new bank which may lead to an extension of loan tenure as well. This will further, reduce monthly EMI’s
- Credit Score - If the borrower has been paying EMI’s on time but realizes that in future repayment of loan might be a challenge due to financial constraints, balance transfer gives them the flexibility to increase credit repayment cycle which saves him from getting a bad credit score and hence lower EMI in future to release burden.
- Additional Loan Amount - While doing a balance transfer, the borrower has the advantage of taking an increased loan amount over and above their existing loan amount to fund their further financial obligations.
- Switching lender if unhappy with the services - The borrower gets the option to move to a new lender in case the current lender’s services are not as per their expectation
How will LoansJagat help you?
- LoansJagat helps you know your exact outstanding amount of loan with the current Bank or NBFC along with the list of documents kept with them in case of Home loan and Loan against property.
- LoansJagat helps the borrower to look for a better-suited lender on the basis of their requirement, whether it is lowering of the interest rate and hence the monthly EMI or increasing the tenure of the loan or even getting an additional loan over and above the current amount in a hassle-free way through a dedicated professional assigned to you.
- As in the case of Balance transfer, banks usually demand a minimum 6-Month clear repayment track record of your monthly EMIs. LoansJagat guides the borrowers to get the right documents like the statement of accounts having a repayment track from the bank where the current loan is running
We take special care in giving support to the customers to make the best possible decision and safeguard their interests.
Bank that does the balance transfer will carry out its own creditworthiness assessment, which will include going through the credit score and financial details of the borrower. In case of bad score showing irregular repayment trends chances of request cancellation for a balance transfer is high from new lender.
Things to take care while taking Balance Transfer:
Ravi who has a home loan for Rs 25 lakh from X bank wants to switch the bank due to bad service experience, as a borrower opting for balance transfer for the first time, he needs to be careful about the following:
- Fees: Balance transfer comes with a transfer fee which typically varies from loan to loan and bank to bank. It may vary from 0% to 4% of the outstanding loan amount. Thus, if you are transferring a large amount say, Rs 10,00,000, an uncapped fee of 3 percent can be a significant addition and a cut into the savings. To limit the fee you pay, try to find a balance transfer offer in which the fee is capped at a certain amount.
- Terms & Conditions: A balance transfer is a good debt-reduction strategy as long as one follows the rules. Ensure you have read the fine print in agreement so that you don't get burned and lose all the savings you hoped to get from the transfer.
The Essence of this product is to have a life where a loan does not make the borrower feel burdensome. This a lucrative option to be taken if income increases which mean the probability of paying back the loan is high or if income decreases which mean that you can extent your loan tenure again via balance transfer and hence reduce your EMI on the current outstanding loan amount. You can opt for a balance transfer once every year. For example, if the loan tenure of your home loan is 20 years, then you can opt for home loan balance transfer for 20times or even more to reduce your EMI burden and hence interest rates. It has no limit.