The balance transfer process allows individuals to save on their loan repayment by shifting their outstanding balance from one lender to another. With a reduction in interest rates and favourable loan terms, this procedure paves the way to make savings on EMIs and interest outgo.
For a personal loan balance transfer, borrowers can easily transfer their credit to a lender offering better interest rates. Since the RBI has not changed the key policy rates in its latest meeting, it presents an ideal scenario for individuals to opt for this facility.
The following is a guide on the things to check before applying for this procedure.
5 things to factor in before loan transfer to save more on your EMIs
Before a loan transfer to other NBFC, one needs to consider the following factors –
- Evaluate interest rate
Since saving on interest payment is the motto of this process, evaluating the interest rate is imperative. Borrowers need to check for the most competitive interest rates when planning a balance transfer. Individuals can use a personal loan calculator to decide. Note that at least a 0.5% difference between existing and new interest rates ensures savings.
- Find the right tenor
With a loan transfer, individuals get a chance to reset their debt payments. Thus, they can extend or reduce their loan tenor to suit their financial standing. Alternatively, they can negotiate with their prospective lender regarding this and then decide.
- Factor in the additional charges
A balance transfer includes foreclosing an existing loan and starting a new one. Hence, it involves additional charges. Considering these fees in advance is important, as it can increase or decrease borrowing costs.
Therefore, borrowers must take stock of these charges and negotiate to reduce them if possible before signing a personal loan agreement.
- Timing is key
Timing the balance transfer is vital to make the most of it. Since interest payment is higher in the initial years, opting for a balance transfer at the end of the tenor will not solve its purpose. Alternatively, carrying it out too early in the repayment tenor might attract extra charges. Hence, timing it properly is imperative to acquire maximum benefits.
- Look for pre-approved offers
To expedite the loan application process, one can look for pre-approved offers by leading NBFCs like Bajaj Finserv. This offer is available on various financial products like personal loans, business loans, etc. One can now quickly check their pre-approved offers by submitting essential contact details.
Personal loan balance transfer presents an opportunity for debtors to shift their loan to a financier offering better terms, and most importantly, lower interest rate. Resultantly, they can realise better savings on their repayments.
Benefits of a personal loan balance transfer
Here are the ways a loan transfer can benefit an individual –
- Lowers the financial strain
The main focus of balance transfer is to opt for a loan at a more competitive interest rate. Since interest payment constitutes the lion’s share of any loan, a lower rate here makes a significant difference. Thus, a balance transfer can be highly beneficial.
- Get better benefits
Along with reduced interest rates, another advantage of this method of shifting a personal loan is the additional benefits it comes with. Features like top-up loans allow individuals access to additional funds at affordable terms. Borrowers can read through the terms of this process to know more.
- Flexibility in repayment
A notable benefit of a personal loan balance transfer is it lets a borrower restructure the repayment process. An alteration in an interest rate and loan terms allows borrowers to change the tenor and extend it to reduce EMIs. Lenders may offer additional options like pre-payment and foreclosure to further aid debtors in paying off their credit without any hassle.
- Stabilise and improve the credit profile
Individuals struggling to repay their personal loans in the current system can utilise this avenue to reduce their chances of defaulting or late payments. Resultantly, a balance transfer can help borrowers stabilise and better their credit profile with regular payments and successful closure of a loan.
Personal loan transfer can play a pivotal role in improving an individual’s savings when done right. Its benefits can aid individuals to save on their monthly instalments significantly.