The financial market is on the rise and a number of lending institutions are coming up with lucrative offers. Lower rates of interests and easy EMI options are some of the most common offers you’ll come across. These concepts, though attractive, often involve a number of complications that don’t crop up until you start the application process.
So, as a borrower, it’s your duty to understand all the complexities involved in getting your Personal Loan balance transferred. Let’s start with the basics.
What is Balance Loan Transfer?
Balance loan transfer means approaching a lender and asking them to repay the loan amount to your current lender, and allowing you to continue the outstanding loan with the new lender with renewed terms and conditions. The entire procedure benefits the borrower while the lender gets a new business account.
If you have a Personal Loan, you might have thought about applying for a Personal Loan balance transfer. While the offer looks lucrative to both the parties, should a low rate of interest be the only deciding factor while transferring the balance amount? No.
There are a number of other factors that should also affect your decision. Some of these factors are listed below and they will help you evaluate whether the entire process is feasible or not.
Total Outflow Involved
The total cash outflow is one of the major factors that should affect your decision while transferring your Personal Loan. If the new lender allows you to pay lower EMIs, it automatically means that you will be repaying the loan over a long period of time. This means that your total outflow of cash is definitely going to increase. Just to be sure, calculate the total outflow involved with both the lenders before taking any decision. If your current financial situation allows you to repay the loan amount in larger EMIs, consider sticking to the current lender and clearing off your debt as soon as possible.
Consider the Processing Fees and Allied Charges
If you transfer your loan to another lender, it’s most likely you will have to pay a variety of charges including processing fees, valuation fees, technical charges, stamp duty, and other allied charges. Compare these charges with the benefits of the lesser interest rates to ensure you’re not losing more money. The processing fees is often a percentage of the outstanding loan amount, check out interest rates for personal loan online. And sometimes, your current lender might increase the closure charges to make up for the fact that you’re closing your loan account and opting for another lender.
Go for a Collateral that is Equal to the Outstanding Loan Amount
For borrowers who have paid a huge chunk of their loan, transferring their outstanding balance amount might not be a good idea. But if you really want to go ahead, offer a collateral that denotes the fair value of your outstanding loan instead of the original collateral. And, you can use the older collateral to secure another loan. If the lender doesn’t agree on a different collateral, then you can negotiate the rate of interest levied on your loan amount.
The Allied Account Requirements
A financial institution has its own sets of regulations that you might have to follow. They might need you to open up a savings account and route your money through that account. In such cases, you need to know the extra service charges involved to ensure that you are not suffering a loss. Also, if the new repayment policy seems too difficult to follow, it might be a good idea to stick to your current lender. You can also check out the your eligibility for personal loan from online.
Terms and Conditions
Each loan agreement has its own set of terms and conditions, which you should read carefully. Overlooking policy clauses might come at a great cost. Some lenders might pitch in conditions like depositing a certain sum in a fixed account or buying insurance from a specified company. Read these terms and conditions to ensure that you do not face any difficulties in future and also to understand the advantages and limitations of each condition.
Lending institutions often attract customers with a variety of offers, which might include a free credit card or insurance policies. Before falling for these offers, assess whether you need these services or not. Enquire about the different terms and conditions pertaining to these offers so that you do not end up changing your lender for an offer that can’t materialise.
It’s always advisable to be conscious of the benefits of changing your lender. For a marginally lower profit, you might end up with a lot of inconveniences. At the end of the day, each organisation in the market wants to earn profits. So, why would one lender want to lose out on interest charges when others are gaining? Therefore, it’s in your best interest to be assess schemes critically before closing your current loan account.