Personal Loan Balance Transfer: A Way to Reduce the Burden of Your Existing Personal Loan

A balance transfer is a facility granted by banks and financial institutions that allows customers to transfer their outstanding principle balance to another bank or financial institution. Personal loans, as well as other types of loans, are eligible for balance transfers. Balance transfers, often known as refinancing, are used to take advantage of lower interest rates and other benefits. In this blog, we will explore personal loan balance transfer facility:

Features of Personal Loan Balance Transfer

Personal loan balance transfer comes with an array of features. Some of them are given below:

• Better Services:

If you are dissatisfied with the services provided by your present lender or financial institution, transferring your personal loan balance can frequently provide you with better services. With the balance transfer option, a borrower might choose a lender that can give better services than the existing one.

• Lower Rate of Interest:

One of the most important aspects of a personal loan balance transfer is that it frequently provides a better/lower interest rate. In most cases, the new lender will provide a reduced interest rate on the loan transfer. As a result, the borrower’s interest burden is lowered as the EMIs are lowered.

• Longer Repayment Tenure:

You can typically renegotiate loan terms by transferring your balance to a new lender, such as extending your loan repayment period. The monthly EMI burden will be reduced as a result. It may, however, result in greater overall interest payment. Some lenders may also allow you to shorten your payment period. While choosing a short-term may result in higher monthly EMIs, it may also help to lower the overall interest paid on a loan.

• Avail Additional Features:

Other lenders may make you an offer for a better loan with better terms, such as a waiver of the last EMI, no processing costs, reduced interest rates, and so on, based on your payment history and changing income dynamics. The personal loan balance transfer facility can thus help the borrower not only save money on interest, but also receive a loan with superior features.

• Top-up Loan Facility:

In the event that one is ready to transfer an outstanding personal loan from one lender to another, several lenders or financial institutions can offer top-up personal loans at a competitive and relatively lower rate of interest.

Documents Required for Personal Loan Balance Transfer

Documents needed to do a balance transfer on your personal loan may vary from lender to lender. Listed below are the essential documents you may need:

For Salaried Applicants

1. 3 months salary slips
2. Identity proof:
3. Passport, Aadhar Card, Driving License, etc.
4. Address proof – Aadhaar Card, passport, voter’s ID, etc.
5. PAN Card
6. Duly signed personal loan balance transfer application form along with passport size photographs
7. Statement of personal loan from a current lender (for the loan that needs to be transferred)

For Self-employed Applicants

1. Last 3 years balance sheet
2. Profit & Loss account statements
3. TAN Card/GST number
4. Last 6 months current account statements
5. Applicant’s savings account statements
6. Statement of personal loan from a current lender (details of the loan that need to be transferred)

Eligibility Criteria

The following are some standard criteria that apply to balance transfers of personal loans to most banks:

• To begin the balance transfer process, the current outstanding loan amount must be at least Rs. 50,000.
• It is necessary to have a clean history of loan EMI (equated monthly installment) payments. The last twelve payment payouts of the existing loan will be verified at the very least.
• As required by the new lender or financial institution, one or more extra loans/credit cards in good standing.
• The CIBIL score is needed by the bank, which is usually 700 or higher.

Process of Personal Loan Balance Transfer

Following are the steps involved in the personal loan balance transfer process:

• Calculate the interest savings on your personal loan by comparing current interest rates from different lenders.
• Calculate the expected cost of the loan transfer, taking into account any applicable charges and fees.
• Consider the net benefits before deciding whether or not to transfer your balance. Make a list of a few lenders to whom you might want to move your current loan.
• Compare the interest rates offered by the lenders you’ve narrowed down to, as well as your loan amount eligibility and their lending process.
• Then, apply for a NOC (No Objection Certificate) and foreclosure letter from your existing lender after you’ve decided on the new lender and decided to move forward with the transfer.
• Begin your application with the new lender. Submit the loan documentation, as well as a thorough payback history.
• Obtain a letter of approval and sign the new loan arrangement with the new lender.
• Get a disbursement (of the outstanding loan amount that you owed the previous lender) from the new lender in the form of a check or a demand draft in favor of the prior lender.
• When the prior lender gets the outstanding loan money, all cheques and ECS will be cancelled, and your personal loan account will be closed.

Balance Transfer Charges

The charges associated with transferring the outstanding balance of an existing personal loan to a new lender may differ depending on your current and new banks. The foreclosure charges that you must pay to your previous lender and the processing fees that you must pay to the new lender are two significant charges included in a personal loan balance transfer.

• Foreclosure Charges: The foreclosure charge must be paid to the present lender in order for your personal loan to be taken over. Depending on the lender, the rate might range from 0% to 4% of the outstanding debt. But, depending on the loan agreement, some lenders may charge a flat fee or a higher price.
• Processing Fees: These fees range from a flat cost of Rs. 500 to 4% of the loan amount and must be paid to the new lender for the completion of your personal loan application (on transfer).