Important Things You Should Know About Personal Loan Balance Transfer
Personal loans are an excellent solution for dealing with financial problems, especially when you need emergency funds. The best part about it is that they’re available from various lenders in the country. Still, although a personal loan can act as a lifesaver during a monetary crunch, it comes with higher interest rates when compared to other kinds of loans.
This is where a balance transfer personal loan option comes in handy.
If the high-interest rates of your loan are troubling you, explore personal loan balance transfer options today. Let’s begin by helping you understand what a personal loan balance transfer is.
Understanding Personal Loan Balance Transfer
A personal loan balance transfer is a method where consumers can transfer the complete due amount of their personal loan from one lender to another. As a result, they get a cheaper interest rate on the remaining loan amount. However, remember to carefully assess the offer of a balance transfer personal loan and select the one that helps you save the most on total interest payments.
Now let’s talk about how personal loan balance transfer works.
Knowing How Personal Loan Balance Transfer Works
When you opt for a paperless personal loan with a new lender, they pay off your old debt (your loan with a high-interest rate). However, you’ll have to pay the fees for previous prepayment conditions and the processing expenses for your new loan. Still, when you consider the savings from the reduced interest rate, it will compensate for these expenses.
Here’s an example to help you understand how balance transfer works.
Let’s say you have a personal loan with XYZ bank:
Principal amount—₹1,00,000; and
Interest—13% p.a. for two years.
Your EMI for the 24 months will be ₹4754 per month.
The balance at the end of the first year will be ₹52,735.
After a year, suppose you opt for a personal loan balance transfer at 9% p.a. If you pay the lender over the next two years at this rate, your EMI will fall to ₹2,458 per month.
Now that you have a clear idea about a personal loan balance transfer and how it works, let’s talk about its many benefits.
Advantages Of Opting For Personal Loan Balance Transfer
Before you make a decision, consider the following benefits of a personal loan balance transfer.
- Enjoy Lowered Interest Rates
One of the most significant advantages of the personal loan balance transfer service is that it decreases the interest rate, lowering your interest load through cheaper EMIs. Your new lender would provide a reduced interest rate on the loan transfer. However, we recommend you analyse your requirements and compare the rates/benefits before opting for a paperless personal loan.
- Get an Extension on the Loan Tenure
While transferring a personal loan, you can discuss the terms of repayment for the existing loan and opt for an extension or even lower the interest rate. Opting for an extended term will help you enjoy the benefits of a reduced monthly EMI but a higher interest payout. On the other hand, lowered loan tenures will reduce the interest payouts but have increased monthly EMI.
- Avail Top-up Loans
Most lenders offer the option to get a top-up loan besides personal loan balance transfers at highly competitive pricing and considerably lower interest rates. Choose that.
Eligibility Criteria For Personal Loan Balance Transfers
Some of the fundamental eligibility conditions for personal loan balance transfer are:
- Already have a personal loan from another bank/financial lender
- The minimum loan sum should be Rs. 50,000 or higher
- No outstanding bank payments, and should have made on-time payments on all of your instalments
- Excellent credit score and credit history
Note:
Other lenders may also give you extra perks in return for using their lending facilities based on your credit history.
If you have an excellent credit history, you may avail of the following extra benefits:
- Waiver of the most recent EMI or
- No processing costs. etc
Documentation for Personal Loan Balance Transfer
Some documents that you need to keep in place when opting for a balance transfer are:
- Fully signed and completed application form with passport-size photos
- Proof of age and identity like PAN Card, Driving License, Voter ID Card, or Aadhaar card.
- Address Proof such as Rent agreement, Aadhaar card, Telephone bill, or Electricity bill.
- Bank statements and salary slips for the last three months
- Personal loan statement for the debt that will be transferred
You must fill out and sign several documents if you choose to transfer your balance transfer personal loan. As a result, you should have a thorough understanding of the terms and conditions of your loan. To avoid slipping into the trap, you must thoroughly check all documents before you make a decision.
Remember that choosing a balance transfer for your personal loan is an excellent option if you have an existing loan with a higher interest rate. However, before you transfer your loan, consider your ability to repay and whether it will provide you with long-term advantages.
Choosing The Best Personal Loan Balance Transfer
Keep in mind that even balance transfer personal loans involve debt. Therefore, examine your finances, develop a repayment strategy, and then decide.
If you need help with finances, you can always take the help of experts such as Piramal Finance. They can guide you on when to apply for a personal loan balance transfer and if it would benefit you.