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Factors to Keep In Mind Before a Personal Loan Balance Transfer

IndianMoney.com Research Team | Posted On Thursday, December 12,2019, 05:39 PM

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Factors to Keep In Mind Before a Personal Loan Balance Transfer

 

 

If you are struggling to pay your EMIs on your personal loan then personal loan balance transfer is a great option for you. A personal loan balance transfer can help you reduce your financial burden and help you to pay off your debt at a lower interest rate. Read to know how it helps you to manage your finances:

What Is A Balance Transfer?

A balance transfer is a facility offered by banks to customers using which borrowers can opt to transfer their dues to another bank in return of better interest rates. People usually opt for balance transfers to get better terms on their existing loans or to consolidate debt.

A personal loan balance transfer works exactly like a credit card balance transfer. You can avail better interest rate and depend on your current credit score your new lender might qualify you for a top-up loan or a higher loan amount as well. Borrowers can either opt for a different lender or the same lender for a personal loan balance transfer. However, personal loan balance transfer depends on the availability, guidelines of the bank and the credit profile of the borrower.

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See Also: Personal Loan In Bangalore

When Should You Opt For A Balance Transfer?

A personal loan balance transfer means you can enjoy better terms on your existing as well as get an avenue to lower your financial burden. Lenders sometimes qualify borrowers for a higher loan amount based on their credit ratings. Some of the reasons why you can opt for a personal loan balance transfer are listed below:

Additional amount: Some lenders allow borrowers avail top-up loans on their existing personal loans. You may opt for a balance transfer if the new lender gives a lower interest rate along with a top-up loan facility. A top-up loan allows you to avail credit to meet your urgent financial needs.

Better services: Customers are sometimes dissatisfied with the services provided by their lenders and want to opt out from such services. If that is the case with you, then you do not have to wait any longer to pay off your dues to dissociate with your lender. A personal loan balance transfer will allow you to discontinue your relationship with your current lender and provide you with an avenue to get better service from other lenders.

Better terms on loans: The most crucial reason why most people opt for a balance transfer is that it allows you to avail better terms like a lower interest rate on loans, or longer repayment tenure. Sometimes, when people borrow money they avail loans at higher interest rate either due to their salary or their credit records. With an increase in the credit ratings or income, the same individual becomes eligible to get the facility to transfer the loan amount for a lower interest rate.

See Also: When Should I Get a Personal Loan?

Is It A Good Idea?

A personal loan balance transfer is no doubt one of the best facilities if you are burdened with a higher interest rate or are dissatisfied with the services of your current lender. But transferring your existing loan to another bank is similar to availing a fresh loan. Therefore, before signing any document for a balance transfer, make sure you conduct thorough research.

It is better to collect details about how the entire process is going to be conducted and how much charge you have to incur. Consider evaluating the current loan with the total cost of the new loan. If you find out that the total charge incurred on balance transfer is allowing you to lower your financial burden then it is wise to opt for it. But if you are ending up paying even more after the balance transfer then there’s no point availing a balance transfer.

Sometimes people also opt for a balance transfer to increase their repayment tenure. Though it helps you lower your EMI burden, you often end up shelling more amount of money on the same loan. To opt or not to opt for balance transfer depends on your financial situation. However, it is meant to ease your financial burden and thus you must decide accordingly.

Things to keep in mind:

  • Most banks give introductory offers like a welcome bonus or discount cards to lure customers. Instead of getting attracted by such offers it is wise to compare balance transfer based on the interest rate, additional charges you may have to incur and the terms offered by the bank.

Before finalizing the bank make sure to evaluate the total package you are getting. Getting a lower interest rate for a higher duration means you will eventually end up paying more than intended. 

See Also: How to Get Personal Loans Instantly?

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