Personal Loan Balance Transfer: Everything About Interest Rate and Fees

In times of financial hardship, your finances take a hit. Your immediate financial needs force you to take out a personal loan. In that case, you may want to ease your financial stress by decreasing your interest payments and EMI. 

So, can you do a personal loan balance transfer?

Keep reading to find out!

What is a Personal Loan Balance Transfer?

A balance transfer is a procedure by which a lender transfers the total amount owed on a personal loan. The lender transfers the amount from one lender to another lender. This often occurs when people switch banks for lesser interest rates on the current loan. A decrease in total debt is the major goal of a personal loan transfer.

Suppose you want to reduce the interest you’ll pay on your loan. In that case, you must check each balance transfer offer before deciding which one to use. Also, you don’t need to submit collateral when transferring loans. 

How does Personal Loan Balance Transfer work?

Suppose you transfer your personal loan from one lender to the other. Then, the newer bank will pay off the old loan. And, if your existing loan has a foreclosure fee, you may have to pay it. But if you could reduce your interest rate, your funds will be more than these costs.

Personal Loan Balance Transfer Interest Rates

The interest rates by your current lender are always higher than those given by new lenders. Yet, the interest rate on a new personal loan will depend on various factors. 

These factors are:

1. The money you owe
2. How long you’ve had the loan
3. Your creditworthiness, your salary
4. The lender’s risk assessment

Balance Transfer Processing Fees and Charges

Suppose you took out a personal loan with a set interest rate. In that case, your loan provider can levy a foreclosure fee. A fee of up to 5% of the remaining loan balance if you switch lenders. 

Suppose you take the example of unsecured loans with variable interest rates. In that case, lenders will not impose a prepayment penalty. But when transferring a personal loan balance, expect to pay a service charge of between Rs. 500 and 4% of the principal amount.

Benefits of a Personal Loan Balance Transfer

Here are some benefits of a personal loan balance transfer:

Better Rate of Interest

Lowering the interest rate is the primary benefit of transferring a personal loan. That’s because it reduces the total amount of interest paid over the life of the loan. Hence, if the borrower transfers their loan to a different lender, they can get a better interest rate. 

Yes, your new financial institution will raise your interest rate. But institutions like Piramal Finance decrease interest rates after reviewing your financial history.

Extended Duration on the Loan

When switching personal loans, you can renegotiate the loan’s repayment terms. Depending on the talks, there is some negotiation room in the EMIs and lending rates.

Also, it is not necessary to have collateral to transfer a personal loan amount. Yet, banks can charge small fees, such as foreclosure fees and administrative costs. They can also charge credit agreement stamp duties.

Added Features

Income, credit, and payment history are all considered when determining eligibility for features. Some lenders give more attractive terms. Terms like:

• No initial costs
• Cheaper interest rate
• Cancelled last EMI

Also, you can lower your personal loan interest. And, you can use the balance transfer option and qualify for enhanced loan terms.

Increase in Credit Line

When transferring a personal loan, several banks also have the option to add funds. Also, the interest rates on newer personal loans are among the lowest. Plus, several lenders and banks offer top-ups among the lowest in the industry.

Transferring your personal loan can help your economic situation. Also, it can help you make better repayment decisions. 

Things to Consider When Opting for a Personal Loan Balance Transfer

Here are some things to think about before deciding on a balance transfer for your personal loan:

Check the New Offer

It’s important to figure out how much payment you’ll have to make. Also, to figure out how much the balance transfer would save you. You must use a personal loan balance transfer calculator to find your cost savings. As with the previous, this is accessible over the internet.

Cost Involved

Transferring a personal loan from one institution to another often has fees. Personal loan foreclosure fees and balance transfer fees are possible. Thus, when calculating the balance transfer facility’s worth, include these expenses.

Terms and Conditions

Before saying yes to a balance transfer on a loan, it is vital to understand all terms and conditions. So, read the terms to ensure you understand all important points and fees.

Offer vs. Need

If a balance transfer option is available, you should only use it if it meets your individual needs. For example, some clients don’t need a balance transfer facility’s top-up loan options. To make the best decision, you must weigh the balance transfer offer’s future benefits.

Conclusion

You should find a personal loan balance transfer and go with a new lender. But do this only if you find that the interest rates on your current loan are too high. There’s tough rivalry in the lending industry. Hence, you can shop for the most vital interest rates and policies to your advantage. 

Personal loans can be quite helpful when money is tight. Plus, by transferring your loan, you can get lower rates and better terms in the future.