Personal loans have changed the borrowing landscape in India. With the introduction of dedicated loan apps and digitalization of finance, availing small to mid-ticket loans has further become easy. You simply need to meet a handful of eligibility requirements and furnish the necessary documents to initiate a loan processing. This typically assisted Indians during the pandemic-induced financial crisis, leading them to resort to small-ticket loans that are easy to avail for immediate and urgent financing. Personal loans are a boon and there are many reasons that make it a smart financing choice. One such intriguing feature of personal loans is the availability of the balance transfer facility.
Even though not all personal loans come with this feature, many reputed financiers provide all possible features and facilities to borrowers for easy loan management, balance transfer, or refinancing. The feature breaks the notion that interest rates on personal loans cannot be reduced once the advance is availed, and it has everything to do with the balance transfer facility.
To give you an insight, here is a quick look at what this facility comprises before we delve into the steps you must take to avail it.
What is a Personal Loan Balance Transfer Facility?
A balance transfer is a process of refinancing your existing loan with a new lender offering better terms on the advance. Usually, under a personal loan balance transfer, you can switch to a new lender offering a lower rate of interest than your existing lender. Availing the facility leads to a complete release of the loan liability with your existing lender and creation of new liability equalling the outstanding loan value with the new lender at re-arranged terms of service.
The balance transfer facility on personal loans is also available through loan apps today, with the regulating lenders providing the best features on these facilities for enhanced borrower convenience. However, before opting for a personal loan balance transfer facility, you must be aware of a few crucial aspects related to it.
Below is a detailed guide on how to go about transferring the outstanding balance of your personal loan with a new lender. Checkout all the necessary steps that you need to take.
Your Step-by-Step Guide to Availing Personal Loan Balance Transfer
Whether applying for a personal loan balance transfer facility through a lender website or through a loan app, the steps that you need to take are going to be the same. Make a note of the following points for the easy transfer –
Step 1: Do your market research to find the lender offering the best interest rates
Today, several lending institutions are providing balance transfer facilities for existing personal loan borrowers typically with reduced rates of interest. Irrespective of whether it is an urgent online loan or a conventional personal loan, the balance transfer feature can be inherent, and you only need to enquire with the lender about its availability.
Anyway, you need to assess the offers that these financial institutions are providing related to a personal loan balance transfer facility. Apart from reduced rates of interest, these offers also include other favourable terms of service that the borrower must go through.
Step 2: Estimate the total cost of the balance transfer
Once you have decided on the new lender to refinance your personal loan, you must assess the total cost involved. While some existing lenders may charge a fee for foreclosing the loan before the tenure, others may not. Also, refinancing the loan involves paying a processing fee to the new lender. Consider both these charges to estimate the total cost of refinancing.
Step 3: Cross-check your savings with the total cost applicable to assess effective benefits
The primary aim of availing a balance transfer facility is to save on the total interest payable. Hence, you must calculate the total interest pay out that you would be saving by switching your loan account. Also, since a significant cost is involved with availing the facility, compare this cost with the total savings that you are going to make. It is ideal to proceed with your personal loan balance transfer only if the savings are significantly higher than the total cost.
Step 4: Apply for a personal loan balance transfer with your selected lender
Next, proceed to apply for the balance transfer facility with your new lender, whether through a loan app, through their website, or in person. It is ideal to go with the first mode as it makes the processes hassle-free. Fulfil the additional requirements, if any, like repayment records, to receive approval.
Step 5: Obtain a NOC from your existing lender
Once your new lender has approved the balance transfer, you can approach your existing lender to transfer the outstanding amount to the former. Post this, obtain a NOC from your previous lender stating the fulfillment and release of all liability owed to them.
Once all these steps are complete, you can complete your personal loan refinancing by signing the loan agreement. Make sure to go through the fine print of this agreement so that you know all the essential details related to your loan terms. You can get all the required details related to the personal loan balance transfer facility from your lender’s loan app right at your fingertips. So, you may as well go for it if you have already planned the refinancing.