Are you struggling with high interest rates on your current personal loan? The large monthly payments may be challenging for your budget. However, you can lower your interest costs by shifting your existing loan to a new lender offering better rates.
This article explains balance transfers, key benefits, eligibility criteria, and a step-by-step process to transfer your loan.
What Does a Personal Loan Balance Transfer Mean?
A balance transfer of personal loan refers to moving your present personal loan from one lender to another to take advantage of superior terms and interest rates.
Here is how it works:
The new lender to whom you shift your loan will settle the outstanding principal amount on your current loan and close that account. As a borrower, you must repay the loan to the new lender according to the new terms agreed upon.
Reputed lenders like IDFC FIRST Bank enable seamless personal loan balance transfers through easy application procedures and fast processing. This eliminates the hassle of manually closing your active loan and taking on extra work.
Advantages of a Balance Transfer
Choosing a personal loan balance transfer can offer these benefits:
1. Lower Interest Rates
Balance transfers allow you to change to cheaper interest rates even when existing rates in the market are high. This directly helps decrease your interest payments across the loan term, reducing financing costs. For example, securing a 0.5 to 1% lower rate can save large amounts over months and years.
2. Lower Processing Charges
Many lenders offer low or zero processing fees on balance transfers compared to fresh loans. IDFC FIRST Bank, for instance, has minimal processing charges, making transfers more affordable.
3. Flexibility Through Personal Loan Online
Numerous lenders provide balance transfer options within their online personal loan services, guaranteeing you can easily handle the application without going to a physical branch.
4. Longer Loan Duration
You can negotiate longer repayment periods through a balance transfer based on your eligibility and creditworthiness. Stretching out loan maturity reduces your EMIs, allowing you to free up your monthly cash flow.
5. Increased Loan Amount
Suppose you had availed the maximum permissible loan amount in your existing account with little scope for a top-up. In that case, a fresh balance transfer allows you to borrow more significant amounts per eligibility and need.
Eligibility Necessities for a Personal Loan Balance Transfer
To qualify for transferring your loan, you must fulfil the lender’s eligibility standards. Here are the common criteria:
For Employees
- Age Range: 23 to 60 years old
- Necessary Papers: Last 3 months’ bank statements
For Self-Employed
- Age Range: 25 to 65 years old
- Operating business for a minimum of 3 years
- Essential Papers: Income evidence and bank statements
- Records for the Actual Transfer
Additionally, you must submit the following documents for the balance transfer itself:
- Home Ownership Evidence: Sale deed, utility bills, or tax bills
- Loan Proof: Repayment schedule, loan closure notice, or account summary
However, the documents required for a balance transfer may vary depending on the loan provider.
Steps to Transfer the Loan
Follow these steps for a smooth personal loan balance transfer:
1. Select Your Lender
Shortlist lenders like IDFC FIRST Bank by matching interest rates, fees, tenure limits and other terms online. Use a loan calculator to estimate repayment amounts and select the best-fit lender for your financial situation.
2. Online Application
Visit your selected lender’s website and fill out the balance transfer application form with your loan amount, tenure, income, and other personal details.
3. Approval
The loan provider will assess your application based on your credit score, income stability, and past repayment history before approving it.
4. Submit Documents
You should upload the necessary KYC documents for identity and income proof and your current loan closure notice or account summary to the lender through their website or app.
5. Disbursal
Once approved, the lender will clear your existing loan account and disburse the new loan amount into your bank account as per the new agreement. You now repay the new lender.
After approval, use a loan calculator again to ensure the new terms align with your repayment capacity and budgeting needs.
Conclusion
Transferring your loan to benefit from lower market rates helps substantially reduce interest expenses. Spend time researching lenders like IDFC FIRST Bank, which simplifies completing balance transfers through minimal paperwork and fast online processing.
Evaluate your financial situation and credit health to make an informed borrowing decision. With prudent planning, you can decrease your EMIs and free up savings to accomplish other financial goals.
