Personal Loan Balance Transfer

Personal Loan Balance Transfer is a credit facility wherein the existing personal loan borrowers can transfer their personal loan accounts to other lenders offering lower interest rates, depending on their credit profile. Balance transfer reduces the EMI burden of personal loan borrowers, thereby, reducing the overall interest cost of the existing personal loan.

Since balance transfer is considered as a new loan application by the new lender, borrowers may also opt for a longer tenure to further reduce the overall borrowing cost. However, before applying for a balance transfer, borrowers are required to foreclose their existing loan with the current lender.

The personal loan balance transfer interest rates are usually the same as personal loan interest rates, usually starting from 9.99% p.a. The lender sets the interest rates after factoring in the credit score, monthly income, EMI/NMI ratio, outstanding loan amount, etc. of its balance transfer applicants.

Existing personal loan borrowers should also check and compare personal loan interest rates and other offers by various lenders on Paisabazaar and opt for the one that best suits their requirements.

The eligibility criteria for personal loan balance transfer applicants is the same as that for personal loan applicants. Applicants planning to avail personal loan balance transfer should meet the below-mentioned personal loan eligibility criteria.

Applicants planning to avail personal loan balance transfer facility should have the following documents ready. However, the document requirement varies from lender to lender.

Before opting for the personal loan balance transfer option, it’s essential to evaluate the following factors to ensure that the transfer is financially beneficial:

Savings in the Overall Interest Cost

The primary reason for opting for a personal loan balance transfer is to reduce the overall interest cost of the loan. As personal loan balance transfer requests are treated as fresh personal loan applications by lenders, they levy processing fee, administrative charges and other standard charges applicable to new personal loan applications. Additionally, borrowers may need to pay nominal charges such as foreclosure charges and transfer fees to the existing lender when opting for this facility. Therefore, it is important to factor in these costs while calculating their overall savings from the balance transfer. Transfer the loan only if the net savings in interest cost is significant enough after considering all the costs involved in doing so.

Residual Tenure of the Existing Personal Loan

Personal loan borrowers pay most of their interest component during the earlier stages of the loan tenure, leaving little scope for making interest cost savings through a loan transfer in the later stages. Therefore, unless the primary goal is to significantly reduce the EMI burden, borrowers should try to keep the tenure of their new personal loan – post balance transfer – same as the remaining tenure of their existing personal loan as opting for a longer repayment tenure would result in higher interest cost.

Renegotiating Interest Rates with Existing Lenders

As a personal loan balance transfer is considered a fresh loan application by the new lender, the borrower has to undergo the steps and processes associated with a new application, including loan evaluation. As going through all these steps again can be tedious and time-consuming for borrowers, they should first try to renegotiate the ongoing personal loan’s interest rate with the existing lender before switching. They should go ahead with the transfer option only if the existing lender refuses to match the rates offered by other lenders on their outstanding personal loan.

A personal loan balance transfer offers multiple benefits, ranging from reduced interest rates to improved loan terms, helping borrowers manage their finances more efficiently. A few of these benefits are discussed as below:

Lower Interest Rate

One of the primary objectives of exercising personal loan balance transfer is to avail lower interest rate and thereby, reduce one’s overall interest cost.

Longer Repayment Tenure

Exercising personal loan balance transfer facility can also help a borrower to opt for a longer tenure than the residual loan tenure of his existing personal loan. A longer tenure will reduce then his monthly EMI burden. However, this would lead to a higher interest cost for the borrower.

Access to Additional Funds

Many lenders offer top-up personal loans to those transferring their existing personal loans. Thus, personal loan balance transfer facility would benefit existing personal loan borrowers unable to avail top-up personal loans or being charged higher interest rates for it.

Better Offers and Services

Borrowers should check for balance transfer offers by various lenders, such as EMI waivers, processing fee discount, etc. They should also visit online financial marketplaces like Paisabazaar.com for balance transfer options with lowest interest rates and choose the lenders providing the best offers and services like quick approval and instant disbursal.

Personal loan balance transfer process usually involves the following steps:

The following table gives you an illustration of how a personal loan balance transfer could help you save on the total interest payable: