Reasons Why You Should Go For A Home Loan Balance Transfer
Repaying a loan on time is the fundamental duty of every borrower. But sometimes the rate of interest touches the peak point and it becomes difficult to manage expenses and repay the debt at the same time. Over time if this issue of repayment is not addressed rightly, then you might get into a debt trap from which the recovery will be painful. So, a home loan balance transfer comes into the scenario which can help you get out of this situation.
Transferring balance from one lender to the other can help you get better outcomes and you will easily repay your housing loan. This method is adopted by many who are not satisfied with the services of their current lender.
Well, this article is all about the balance transfer of your housing loan. In this article, you will come across the definition of a home loan balance transfer, its benefits, the reason to do it, and why you should give it a go.
What is a Home Loan balance transfer and what is its purpose?
As said earlier, a home loan balance transfer is a process in which you transfer your current home loan balance from your existing lender to another lender. You can do this if your current interest rate is high and the terms and conditions of the existing lender are unsuitable. Your existing lender might not provide you with desirable services for which you want to switch to a new lender.
After the balance transfer of your housing loan, you longer have to pay your debt to the previous lender. You just have to clear your pending amount and start paying your new lender from fresh. The new lender will now provide you with a better interest rate and other terms and conditions which fulfil your needs.
What are some of the benefits of a balance transfer of your existing House Loan?
There are several benefits of a home loan balance transfer:
- Lower rate of interest:
A simple reason could be the reduction in your current rate of interest. Your existing lender might charge you a high rate of interest which might even be more than the market rate. And to prevent that from happening you might consider changing your lender and looking for one who charges you a lower rate of interest.
A simple change in your interest can cause a huge impact on the repayment numbers of your housing loan. For example, if your interest rate is 10 percent per annum and it comes down to 8 percent per annum, then the difference is 2 percent per annum. But only a 2 percent reduction in the interest rate can make a difference of thousands of rupees in your instalments.
- The long tenure of repayment:
Your existing lender might not give you a long period to repay your debt. So, you might switch to a new lender if the new lender is providing you with a longer period. If your existing lender provides you with 15 years to repay your housing loan, your current lender might allow you up to 20 or even 30 years in some cases.
- Better terms and conditions:
One of the important reasons why borrowers switch from an old lender to a new lender is because they want better terms and conditions. It could be high processing fees, extra charges, and penalties that you don’t think are fair. So, your search for a new lender who charges you zero to minimal processing fees, no extra charges, and lesser penalties.
- Better services:
Another good reason for a home loan balance transfer is because of better services from a new lender. These services include regular updates on your loan status, monthly reminders, offers to lessen your loan burden, etc. Better services and genuine treatment from your new lender can be a big factor.
- Flexibility:
Flexibility is a big factor, especially if you have the advantage to tailor your existing housing loan system. Suppose, you want to opt for quarterly instalments instead of monthly instalments. So, your new lender provides you with optimum flexibility to change your current plan to a new plan. This applies also to your tenure of repayment, where you can change your repayment period according to your suitability.
Should you change your existing lender and opt for a Home Loan balance transfer?
The answer to this question is subjective and depends on your current loan health. Here are some important points to consider for a home loan balance transfer. If you think these fit your case, then you should consider transferring your balance:
- If your interest rate is higher than the market rate and you are not comfortable paying it, you should prefer a balance transfer.
- If your tenure of repayment is short and you desire a longer period to repay your loan, you should consider switching to a new lender.
- If the current terms and conditions of the housing loan system don’t fit your requirements, you should prefer a balance transfer.
- If you want better choices and services, then you should go for a home loan balance transfer.
- If the new lender is promising better offers to lessen your housing loan burden, then you should switch to the new lender.
Conclusion
A housing loan is a financial aid to help you fulfil your dream of having your own house. But factors like interest rates, terms and conditions, tenure of repayment, tailoring options, etc. can stand as obstacles. If your new lender is promising better options and outcomes, you can go for a home loan balance transfer. You should check the ratings of your new lender to ensure that your decision is well-informed.
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