Personal Loan Balance Transfer – Does it Reduce your EMI?
Loan repayment is every borrower’s fundamental duty, regardless of the loan type. Be it any loan, under any circumstances, repaying a loan is the first thing that should come to mind. But with all of that comes the burden of the interest rates on different loans. Sometimes the interest rates get so high that the borrower gets exhausted and couldn’t find a way to get out of this.
In the case of personal loans, some lenders often make it a tight call and you might have to suffer for that. Sometimes, they charge a very high rate of interest and sometimes the terms and conditions do not go your way. To tackle all of that, a personal loan balance transfer is carried out. This helps you change your existing lender and look for a new one who understands your conditions.
Well, in this article, you will know about the personal loan balance transfer, the benefits, and the reasons to give it a shot.
What is a personal loan balance transfer, and what is its significance?
As mentioned above, a balance transfer of a personal loan is a process through which you change your current loan balance from the existing lender to a new one. This can happen when you do not agree to what interest rate your lender offers or the terms and conditions she provides. So, you search for a new lender who charges you a lesser rate of interest and provides you with better terms and conditions.
After a personal loan balance transfer, you no longer have to pay your debt to your previous lender. But make sure that you have cleared all the dues or any existing penalties.
After the personal loan transfer, you have to do the existing payments; you have to close the account and start paying your new lender from fresh. The new lender will provide you with a better rate of interest, better terms and conditions, and genuine offers.
What are the benefits of applying for a personal loan balance transfer?
A personal loan balance transfer can benefit you in multiple ways:
- Better terms and conditions:
Your new lender will provide you with better terms and conditions on your personal loan. This includes zero to a minimal processing fee, lesser penalties, better tailoring options, more room for negotiations, etc. This is one of the prominent reasons why borrowers switch from an old lender to a new one.
- A low rate of interest:
A low interest rate from the new lender could trigger you to switch from the previous lender. Especially, if your previous lender was charging you a very high interest rate, more than the market rate, and you were not comfortable paying for it. A high-interest rate might increase your EMI amount and directly impact your daily expenses. So a new lender sorts this problem out by charging you a low interest rate so you don’t have to worry about repaying in the first place.
Even a very small change in your interest rate can create a huge difference in the EMI amount you might be paying. A personal loan balance transfer can help you experience the benefit of such a small change.
If the interest rate you were paying was 12 per cent per annum and the new lender reduces it to 10 per cent per annum, the impact is huge. Your total EMI amount will be reduced by thousands of rupees which is a massive advantage.
- Tenure of repayment is long:
One reason for applying for a personal loan balance transfer could be the tenure of repayment. Your previous lender might not allow you a longer period for repayment which your lender might allow for.
Suppose your previous lender set a period of 12 years for you to repay the loan and the new lender changes it to 20 years or even 25 years in some cases. This causes a huge impact in terms of the interest rate and the EMI that you are paying.
- High flexibility:
Many times flexibility plays a major role in a balance transfer personal loan. Your previous lender might not have flexible options for you, but your new lender has got the catch. For instance, if you needed to tailor your monthly instalments to quarterly instalments, your previous lender might deny it, but your new lender goes for it. This could be a decent reason for you to switch to a new lender.
- Better services:
Sometimes, your previous lender doesn’t provide you with the services that are important to you. That includes updating your loan status, setting up regular reminders, notifying you about recent offers, etc. But your lender might do all that for you, which helps you manage your personal loan better.
When should you prefer going for a personal loan balance transfer?
In these cases, you should consider going for a personal loan balance transfer:
- If your current interest rate is higher than the market rate, you need to look for a personal loan balance transfer.
- If the tenure of repayment is quite high, you need to consider changing your previous lender and looking for a new one.
- If your lender’s terms and conditions do not suit you, you have every right to switch to a new lender.
- If your new lender is giving you better services like tailoring options, updates, offers, etc., you can think of giving it a shot.
- If you are not convenient in paying the instalment that you are paying currently, you should go for a personal loan balance transfer.
Wrapping it up:
To answer the question, yes, a personal loan balance transfer can reduce your EMI amount, provided that your new lender charges you a lower interest rate and has flexible options. But before making a decision, you must contact your bank and your advisor and let them know about this personal loan transfer. You can compare different lenders and approach them separately to find out which one is the right fit for you.
If you have reached here, it is clear that you are interested in reading about these topics. If so, you can visit Piramal Finance to learn more about personal loans, mutual funds, smart financing, stock market investment, and more.