Availing a loan is in itself a big decision and to finalize a lender with lower interest rates, an equally challenging task. You compare the interest rates of several banks along with other charges, and apply for the personal loan. Few months down the line, you get to know, the other lender is offering a lower interest rate on personal loan, with added benefits. Now, when you inquire the details in-depth, you learn that you are shelling a greater sum of money in paying off-the debts of your personal loan.
You consider the various other factors and charges of the balance transfer, and understand that you can save big on transferring the loan account to a different lender. You then approach your existing lender and convey them your decision to transfer the loan account, being unsatisfied with the current interest rates.
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”.
How to do a balance transfer 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.
Documents required to furnish for the Personal Loan Balance Transfer
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.
Things to consider before you transfer your loan
Collateral and Security value – It is critical to understand the fees and charges with the new loan. 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.
Cash outflow – 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. 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.
Reading the fine print – 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. So, 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.
When you should consider for a balance transfer of the personal loan?
When the interest rate of the current lender is significantly high: It makes an absolute sense to compare the interest rates of various lenders. If you are paying a higher interest rate on your personal loan, which the other lender are offering at a significantly low rate, then you should consider to make a move.
The savings are less as compared to the charges: A thorough analysis of all the charges should be done before finalising the balance transfer. 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.
If there are minimal foreclosure and transfer charges – Festive season are a great time when the lenders usually come up with great deal on loans. Along with interest rates, processing fees and foreclosure charges are also reduced in order to gain the consumer base. You can grab the deal, of the Best personal loan online at your advantage, and save on the monthly outflow of installments. You can save a bigger amount by paying off the extra charges also.
When the loan is in initial stages : You can plan for a balance transfer, 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.
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.
Take advantage of the employment scheme: If you are working with a reputed firm, lenders provide special interest rates to them. You can take the leverage if you are associated with such firms. Similar is with self employed individuals, where professionals like CA, Doctor, Architects are at advantage to avail such schemes.
If you find yourself paying off a higher amount as your debts, balance transfer is a good option to save those extra bucks. Look out for a different lender and after carefully assessing the details, go ahead with the process.