Whenever you are in need of some extra cash, you can always apply for a personal loan. The application process is simple and once the loan is approved, your bank account is credited with money you can use in any way you like. But personal loans, as easy as they may be to get, have a catch. They usually have a very high-interest rate, between 15 to 20%. So if you have been paying high interest on a personal loan, a personal loan balance transfer is a good option for you.
What Is a Personal Loan Balance Transfer?
Personal loan balance transfer is a process of transferring your outstanding personal loan balance from one loan provider to another. Initially, this process only referred to the process of transferring the outstanding balance on your credit card to another, but now it includes personal loans, home loans, and other types of loans too.
What Are the Benefits of Personal Loan Balance Transfers?
● You Can Get a Better Rate of Interest
When you decide to transfer your existing personal loan from one bank to another, you need to consider the personal loan interest rate
offered by the second bank. Only if the rate of interest offered by them is lower, does it make sense to transfer your outstanding loan amount. Lower interest rates are always beneficial as they can reduce your financial burden and help you pay off your loan faster.
● Banks Offer You Lucrative Deals
If you have a good history of paying your EMIs on time, certain banks may notice a trend and may offer you good deals on personal loan balance transfers. The loan eligibility
requirements for a balance transfer are pretty simple when you have a good credit score. They may offer you a much lower rate of interest and may only charge you a minimum amount for the balance transfer. In such cases, you can go through all the options available to you and choose the best personal loan
that suits your needs and profits you financially.
● You Can Avail a Top-Up Loan
In some cases, the money you borrow initially in the form of a loan may not be sufficient enough to fulfill your requirements. In such situations, you have the option of taking a top-up on your loan, which means borrowing extra money over your existing loan. If your loan provider does not agree to give you a top-up loan or does not offer you a good deal on it, a personal loan balance transfer may come in handy.
Sometimes, a different bank may be willing to offer you extra funds at a better rate of interest if you agree to transfer your outstanding loan amount to their bank. You also have the option of adjusting your loan tenure as per your needs. To decide your top-up loan amount and tenure, you could utilise an EMI calculator
to get an estimate about your installment amounts.
● You Can Choose a Bank with Better Service
In some cases, you may want to terminate your association with a certain bank because you are displeased with their services, and an existing loan may be the only reason still keeping you associated with that bank. You can choose a different bank that offers you better service and can transfer your outstanding loan balance to them. Along with better service, you will also get a better deal financially.
What Are the Things to Consider Before Transferring Your Personal Loan?
Usually, the process of transferring your outstanding personal loan balance comes at a price. A bank may charge you a processing fee which may be 0.5 to 1% of your total loan amount. If your loan amount is high, this fee may end up being quite substantial. So before you transfer your loan, talk to your loan service provider and see if you can get it reduced or waived off. If they agree, it can reduce your financial burden to quite an extent.
Read the terms and conditions of the new loan provided with regard to prepayment charges and penalty fees. Prepayment is a good way to clear your debts before the completion of its tenure, but different banks have different conditions regarding it. What the new bank charges and offers in terms of prepayment may be completely different from what your current bank has to offer.
You also need to enquire about the repayment date with your bank. When transferring your personal loan balance, this date may change and you may end up missing a payment if you are unaware of it.