A balance transfer is a simple process of shifting your outstanding loan amount from one lender to another. It is an important part of a personal loan and an understanding of the same will help you handle your personal loan better. The main idea behind a personal loan balance transfer is to make the most of better terms and conditions and to reduce the burden of EMI by a substantial amount.
Table of Contents
Why should you consider a personal loan balance transfer?
There are numerous reasons for you to opt for a personal loan transfer. These are discussed in detail below.
- Better rate of interest: With a personal loan balance transfer, you can avail a better interest rate at a different financial institution or bank. Your high-interest loan can be transferred to a low-interest loan or to a different bank with the option of a balance transfer.
- Better terms of payment: A personal loan balance transfer will help you negotiate your repayment period of the current loan and get a longer tenure. This will help bring down the burden of EMI because you will be paying less every month. Your monthly outflow will reduce and you will be in a better position to handle your finances.
- Better terms and conditions: Many borrowers prefer to transfer the loan so as to benefit from better terms including waiver on EMI, pre-closure of loans and lower interest rates. A personal loan can also be transferred if you are unsatisfied with the terms and services offered by your present lender.
Eligibility for a personal loan balance transfer
To make a personal loan balance transfer, you need to fulfill the eligibility criteria. Your minimum outstanding loan amount should be INR 50,000 or more in order to begin the process and your repayment record should be clear and positive. The lender will check the last 12 installments of your loan before making a decision.
Documents needed for a personal loan balance transfer
You need to provide certain documents in order to make a successful loan balance transfer. The document requirements will vary from one lender to another and from one applicant to another.
Self-employed individuals need to provide the below-mentioned documents.
- An application forms
- Documents that prove your age: Aadhaar card, PAN card, Voter ID and driving license.
- Address proof: Rent agreement, telecom bill, and electricity bill.
- Proof of identity: Aadhaar card, voter ID and driving license.
- Passport sized photograph
- Last six months bank statement
- Statement carrying details of the loan transfer
- Balance sheet and a profit and loss statement for the last three years.
Salaried individuals need to submit the following documents.
- An application forms
- Documents that prove your age: Aadhaar card, PAN card, Voter ID and driving license.
- Address proof: Rent agreement, telecom bill, and electricity bill.
- Proof of identity: Aadhaar card, voter ID and driving license.
- Last six months bank statement
- Statement of loan containing details of the transfer
- Passport sized photograph
- Salary slip of the last three months.
How does the balance transfer work?
It is possible to transfer a personal loan account, home loan account and a credit card account. This process is quick and easy. There are a few steps you need to take for the same. First and foremost, you need to submit a duly signed application form requesting for the transfer to a bank. After raising this request, you will have to get a NOC from the bank and a statement which provides all the details of the outstanding loan amount in addition to a letter of consent. You will have to submit the documents and wait for approval.
The bank will check all the documents and then approve your request of transfer if they consider your repayment history to be satisfactory. The lender will approve your outstanding loan amount for the closure of the loan. After the transfer of loan is done, the lender will give your documents to the new lender and the old loan account will be closed. You will now have a new loan account with a different lender. you can apply for personal loan from the new lender. Hence, when transferring the loan, you will have to go through all the procedures including document verification, payment of processing fees, CIBIL verification and technical evaluation.
Keep this in mind when you transfer a personal loan
- Technical charges and processing fees: You need to understand different charges of the loan including valuation charges, processing fees, and legal charges. These charges need to be compared with your existing loan. Do not focus only on the personal loan interest rate when you make a loan transfer, instead, compare all the charges between your old loan and the new loan you intend to apply for. It will help you estimate if the loan transfer will cut down on the outflows or not.
- Collateral: If you have paid a significant part of the loan and want to make a loan transfer at this stage, you do not need to pledge any security or collateral with your new lender.
- Terms and conditions of both the loans: You need to carefully understand the terms and conditions of both the lenders involved in this transfer. This will ensure a quick transfer and will put you in a better position to make a borrowing decision.
A personal loan balance transfer is an integral part of your loan and if you research and make a well-informed decision, you could be in a better position after the transfer. However, a loan transfer does not only mean a low-interest rate. It actually means better terms and conditions and this could be a preclosure of loan or a longer tenure or a low EMI. Compare the terms and conditions of both the lenders, understand what they have to offer, read through the fine print of the loan documents and then make a final decision about the personal loan balance transfer.
