Personal Loan Balance Transfer
A personal loan is one of the easiest loans to avail. Lower documentation, relaxed eligibility criteria make it very easy for anyone to avail a personal loan. But as personal loans are unsecured loans(availed without collateral) the interest rate tends to be on the higher side.
You might have gone in for a personal loan at higher rates either due to an emergency or due to a lower credit score or some other factor. But the EMIs may start pinching your pocket in no time. A balance transfer of your personal loan can help you out in such situations.
What is a Personal Loan Balance Transfer?
A personal loan balance transfer means a transfer of the outstanding balance on your personal loan from your existing bank /lender to another lender for better terms and conditions. It could be a lesser rate of interest, longer repayment tenure, better prepayment conditions, better service from the lender, etc.
Earlier, a balance transfer was allowed only on credit cards. But now a balance transfer can be done on all kinds of loans like personal loans, car loans, home loans, etc.
How does a Balance Transfer Work on Personal Loans?
Under a balance transfer, you can transfer your existing loan to another lender. To do this, firstly, scout around for loans with a better interest rate or any other factor that you are looking for. Check the terms and conditions of the new lender and also have a conversation with the lender to explain that you are looking to do a transfer of outstanding balances on your loan.
Depending upon the factors for personal loan eligibility which can include your age, CIBIL score (credit score), take-home income, type of employment, other existing loans, and fixed commitments, you could get approval on your loan.
While certain lenders may pay the outstanding balance to your earlier lender, others let you avail of a fresh personal loan. You could then use the new loan to pay off your existing loan. But, there are some factors that you should consider here, your existing loan may be a fixed payment tenure (the most common being 12 months) or a prepayment penalty. The bank/lender taking over your loan would not make these payments. It would have to be dealt with by you.
You would also need to figure in the processing fees that you will have to pay on your new loan.
How to Decide If You Should go in for a Personal Loan Balance Transfer?
It is difficult to pinpoint one single factor that could help you make this decision. You should make a decision to go in for a personal loan balance transfer after considering all the below-mentioned factors
- The interest rate differential between the existing loan and the new loan
- The prepayment penalty to be paid (if any) on the old loan.
- The processing charges for the new loan
- Remaining tenure of the loan
You should be saving some amount after paying the penalty and charges, only then will your balance transfer make sense. Generally, you should choose a balance transfer during the initial periods of your loan, you can reap benefits out of it. But towards the end of the tenure, the charges may outweigh the benefits.
But, if you are looking to make a balance transfer for other reasons like an extension of tenure or due to bad service offer by your existing lender, then you may go ahead even with minimal benefits on the monetary front.
Where Should You Apply for a Personal Loan Balance Transfer?
You could apply for a balance transfer with any financial institution; it could be a bank where you have your savings account, an NBFC, or even an online personal loan lender like Money View. The advantage of applying for an online personal loan is faster disbursal (within 2hrs if all your documentation is in place), lower credit score requirement, and transparent eligibility criteria.
Advantages of a Personal Loan Balance Transfer
There are many more advantages of a personal loan balance transfer than what it appears to be. To sum up, some of the advantages are-
Possibility of a Lower Rate of Interest
The biggest advantage of a personal loan balance transfer is that you could get a loan with a sufficient lower rate of interest which could translate into bigger savings. For example Currently (Sep 2020) the repo rate announced by RBI is 4%. This is 2% lower than the rates 2 years back. If you are stuck with higher rates, this might be the right opportunity and make use of lower interest rate for lowering your monthly EMIs
Ability to Avail a Top-up Loan Along with Balance Transfer
Many lenders also allow the applicant to apply for a top-up loan along with a balance transfer. So, if you are in some sort of financial stress, you may use this opportunity to avail a top-up on your existing loan. This is helpful as you wouldn’t have to go through the entire process of applying for a loan again.
Get Better Terms and Conditions
The terms and conditions associated with a loan vary between lenders. Often you get stuck with lenders just because you were approved a loan. A personal loan balance transfer might be your chance to opt for a lender for better service or better terms and conditions.
For example, A personal loan without a prepayment penalty is anytime better than one which charges a penalty. So a balance transfer could be a way out of these loans.
While a personal loan balance transfer may help you reduce your existing EMI or get you better terms, you should always remember to pay EMI repayments after doing the balance transfer.
Are you looking to close some of your loans with an easy to avail personal loan? Apply today for an instant personal loan from Money View today. Download our app or apply on the website for the loan for an easy personal loan.