Personal loans are unsecured loans that do not seek collateral against the loan amount. That is why these loans are popular amongst the borrowers. However, lenders compensate their risk by offering personal loans at a high-interest rate. It means that the borrower is subject to pay high monthly instalments and more as an interest to the lender. The Personal loan balance transfer is the solution to lower one’s EMIs by reducing the rate of interest. Read to learn how to switch to a lower interest rate.
WHAT IS A PERSONAL LOAN BALANCE TRANSFER?
A personal loan balance transfer is switching the loan from the current lender to the new lender with a lower interest rate. A Personal Loan Balance Transfer saves money that would otherwise go as an interest to the lender. A balance transfer allows for switching the outstanding balance of the current personal loan from the existing bank to another with a lower interest rate. It helps in cutting down the monthly instalments by a notch.
The various benefits of a personal loan balance transfer are:
- Reduced rate of interest.
- Reduction in the EMI amount by up to 5-8%.
- The borrowers can opt for a top-up loan for funding weddings, education, travel, home improvement, medical expenses, etc.
- Increase in the loan tenure. The documentation process is simple due to the lack of attachment of collateral.
- The reduced outflow of money. The reduction in interest rate lowers the EMI and helps you save money.
ELIGIBILITY CRITERIA FOR PERSONAL LOAN BALANCE TRANSFER TO NEW BANK/LENDER
To opt for a personal loan balance transfer, the borrower needs to comply with the eligibility criteria of the new lender.
- The borrower must have a good CIBIL Score
- Regular track record of past 12 months EMI
- Minimum loan amount of Rs. 50000.
- There must be a running personal loan account of the applicant with the other bank.
HOW IS PERSONAL LOAN BALANCE TRANSFER PROCESSED?
Follow the below-given steps to apply for a personal loan balance transfer.
- Thoroughly research the market for better personal loan interest rate deals and calculate your saving on interest.
- The transfer of the loan usually comes with additional costs. Most banks levy several charges on the transferring. Make the calculations appropriately so that you don’t end up paying more in the end. Thus, before making the switch, calculate the net benefits.
- Compare different lenders on interest rates, processing fees, transfer charges, loan amount eligibility, and shortlist them.
- After you have decided to opt for the switch, apply for a NOC and foreclosure letter from your current lender.
- Apply for the personal loan with the new lender and submit the required documents.
- Get the sanction letter from the new lender and execute the loan agreement with them.
- The new lender will disburse the remaining loan amount vide a cheque or demand draft. Deposit it with the bank.
- After your present lender has received the outstanding, it will cancel all your ECS and close your loan account with them.
The processing time of the personal loan balance transfer takes around 4-8 working days.
PERSONAL LOAN BALANCE TRANSFER CHARGES
The balance transfer comes with a few additional charges that the borrower needs to pay. The borrower has to pay the foreclosure charges to the present lender and process fees to the new one. These charges vary from one lender to another. The foreclosure charges usually vary from 0-2 per cent, and processing fees range from Rs. 999 to 2% of the loan amount. It is crucial to compare different lenders for these charges.
DOCUMENTS REQUIRED FOR PERSONAL LOAN BALANCE TRANSFER
Keep the following handy while applying for a personal loan balance transfer.
- Duly filled and signed application form along with passport size photograph. Fill in the accurate details to avoid rejection.
- Identity and age proof (PAN card/ passport, driving license/ Aadhaar card/ voter id card)
- Address proof (Electricity bill/ telephone bill/ Aadhaar card/ rent agreement)
- Salary slip of last three months, and bank account statement of last six months
- Personal loan statement of the current loan.
The balance transfer is a good option if you are seeking long tenure. Fintechs like LoansJagat offers comparative platforms wherein the borrowers can compare and choose from over 40 lenders. They enable personal loans in Delhi and other cities of the country.