Personal loans are a versatile form of credit. You can use them for various purposes, such as medical emergencies, travel, wedding planning, or buying two-wheelers.
With the growing requirement for personal loans, many lenders have emerged in the market. A personal loan balance transfer is a great option if you find another lender offering loans at lower interest rates after paying EMIs with your current lender.
Here, we will understand the benefits and eligibility criteria for personal loan balance transfers.
What is a Personal Loan balance transfer?
A personal loan balance transfer procedure is used by a borrower who wants to transfer their outstanding loan balance from one lender to another, that provides an affordable interest rate on the loan amount.
It is important to evaluate the balance transfer option and choose an offer that saves on the total interest payable. Just like personal loans, balance transfers also do not require any collateral. Although, the processing fees for this process may differ from lender to lender.
Benefits of a Personal Loan Balance Transfer
If you are considering a personal loan balance transfer, below are some benefits you should consider before making a decision.
Interest Rate
You can save money on interest payments by having the option to move the balance of your loan to a different lender, which lowers interest rates. For the loan transfer, the new lender would offer an affordable interest rate. Before using the balance transfer service, it is advisable to determine the need, evaluate the offer, and compare the costs and features.
Loan Tenure
One of the major benefits of personal loan balance transfer is that you may have the option to negotiate the tenure of your existing personal loan.
With a longer tenure, you will pay less EMI each month, but the total interest paid could go up. On the contrary, when the tenure is short, the total interest amount may decrease, but the individual payments increase.
Top-up Loan
Along with allowing you to transfer the balance of your personal loan, many lenders also provide a top-up loan option. These may have a comparatively lower interest rate.
Eligibility for Personal Loan Balance Transfer
Each lender will have their own eligibility criteria. Below, we have listed some of the most common eligibility criteria for personal loan balance transfer.
- There is a minimum age requirement, which varies from lender to lender.
- There should be a minimum outstanding loan amount at the time of balance transfer.
- Some lenders may require a minimum credit score.
- Some lenders may also consider your occupation.
Documents Required for Personal Loan Balance Transfer
Identity Proof
- PAN card
- Aadhaar card
- Driving License
Address Proof
- Electricity bill, rent agreement or Indian passport
Income proof
- Latest salary slip from the current employer
Bank account statement
- Original bank statement for the last three months in PDF format
Employment proof
- Offer letter
- Monthly salary slip
- Copy of the employment contract
How does Personal Loan balance transfer work?
When you transfer the balance of your personal loan, the new lender pays the outstanding sum. If your current loan has a prepayment clause, you may be responsible for those expenses. You will also be responsible for paying the processing fees associated with your new loan. However, when you consider your savings on the lower interest rate, it can significantly compensate for these charges involved.
Important Factors To Consider for Personal Loan Balance Transfer
Interest Rate
Before planning a personal loan bank transfer, research various lenders, evaluate their interest rates and select the one that works best for you. You can use a personal loan calculator to help you calculate monthly EMIs as per the interest rate and tenure of the new lender.
Additional Cost
A loan balance transfer may involve extra expenses. For example, the current lender may ask for foreclosure costs, but the new lender may ask for part of the total amount as processing fees. So, when evaluating the advantages of loan transfer, be sure to consider all of these expenses.
Terms and Conditions
When completing the necessary paperwork for a personal loan balance transfer, it’s important to understand all the terms and conditions of the loan. You must carefully review the specifics of the loan transfer agreement to be aware of important aspects and any additional fees.
Offer and Demands
The balance transfer option should only be considered if it meets your requirements. Not every borrower will find balance transfer to be suitable for their situation. In these circumstances, carefully consider the offer’s overall benefits and long-term implications of the balance transfer.
Conclusion
A personal loan is the perfect solution if you are facing a financial crunch. However, sometimes, transferring your loan balance may be the best solution due to lower interest rates.
Since lenders are in intense competition, so you could choose the best interest rates and better terms or conditions. If you are looking for a personal loan, LoanTap is a one-stop solution. It provides personal loans at affordable interest rates and has no hidden charges.
FAQs
Can personal loan balance be transferred to any lender?
Ans. A personal loan balance can generally be transferred to any lender, but checking the lender’s terms and conditions before transferring is important.
What should be considered before a personal loan balance transfer?
Ans. If you find a lender who can provide loans at lower interest rates,with better terms and conditions and a flexible repayment tenure, it may be worthwhile to consider transferring your personal loan balance.
Are there any fees involved in a personal loan balance transfer?
Ans. Yes, there may be processing fees, prepayment penalties from your current lender, and other charges associated with the transfer. Be sure to consider these factors while making any decision.
Can I transfer multiple personal loans into one with a balance transfer?
Ans. Yes, some lenders may allow you to consolidate multiple loans into one through a balance transfer, simplifying your repayment process.
Does the personal loan balance transfer affect my credit score?
Ans. A new credit inquiry may initially cause a temporary drop in your credit score, but if you manage the new loan well, it can ultimately help you maintain your credit profile. However, if you apply for multiple balance transfer options in a short period, it can cause a more significant impact on your credit score.
