Personal Loan Balance Transfer involves transferring the outstanding loan amount from an existing personal loan account to a new account with a different lender. This process is sought after by borrowers who wish to benefit from better offerings, such as lower interest rates and favorable features. It is especially advantageous for individuals who are currently burdened with high personal loan EMIs or have a short tenure period. However, before opting for a balance transfer, careful evaluation of the transfer offers and the associated costs is essential.
Reasons to Consider Personal Loan Balance Transfer:
- Lower Interest Rates: One of the significant benefits of a personal loan balance transfer is the ability to shift the loan to a lender offering a lower interest rate. This translates to lower EMIs and greater savings, enabling borrowers to focus on other financial goals.
- Flexibility in Loan Tenure: Personal loan balance transfer provides the advantage of changing the loan tenure. Opting for a longer tenure results in reduced EMIs, while a shorter tenure helps pay off the loan faster and save on interest. Therefore, borrowers have the freedom to select a tenure that aligns with their requirements.
- Access to Top-up Loan Facility: With a personal loan balance transfer, borrowers can also avail themselves of a top-up loan facility. For example, if a borrower transfers an outstanding amount of 4 lakhs to a new lender but requires an additional 2 lakhs for other needs, they can easily fulfill this requirement with the new lender. The total loan amount will then become 6 lakhs, and EMIs will be adjusted accordingly.
- Improved Loan Terms: When opting for a personal loan balance transfer, borrowers can choose a lender that offers better terms related to tenure, payment options, pre-closure conditions, or processing fees.
Eligibility Criteria for Personal Loan Transfer:
- Completion of Lock-in Period: The borrower must have served the lock-in period of the existing loan, which typically ranges from a minimum of 12 months with most lenders.
- Good Repayment Record: A clean record of timely EMI payments for the ongoing loan is required.
- CIBIL Score: The borrower should meet the CIBIL score requirements set by the bank, typically 700 or above.
How to Apply for a Personal Loan Balance Transfer:
- Obtain NOC and Foreclosure Letter: Request a No Objection Certificate (NOC) and foreclosure letter from the current lender.
- Apply with a New Lender: Apply for a personal loan with a new lender that offers a balance transfer facility.
- Obtain Sanction Letter: Get approved for the new loan and obtain a sanction letter from the new lender.
- Disbursement and Closure: Receive the disbursement from the new lender through a cheque or demand draft made out to the existing lender. Deposit the amount with the existing lender. After receiving the cheque from the existing lender, ensure that all the cheques and Electronic Clearing Service (ECS) mandates are canceled, and the loan account is closed.
By following these steps, borrowers can successfully complete the personal loan balance transfer process.