What is a Personal Loan Balance Transfer?

Balance transfer is the process of transferring the outstanding loan amount from one bank to another. A personal loan is transferred to get a better interest rate and reduce the monthly EMI burden.

Why Personal Loan Balance Transfer?

There are several reasons why you must opt to transfer personal loans from one bank to the other:

• Personal loans are transferred to avail better interest rates at any other financial institution. If you have taken a loan from a lender at a higher interest rate and want to switch your loan to some other bank as the latter offers lower interest rates, go for balance transfer.
• Personal loan balance transfer helps negotiate the repayment tenure of existing loans and enjoy an extended tenure. The extended tenure helps reduce the EMI burden as you pay less each month.
• Loans are also transferred in order to get better terms and conditions like lower rates of interest, waiver on EMI, and pre-closure of loans without additional charges.
• Personal loans are also transferred when the borrower is dissatisfied with the services provided by the current lender.

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What is a Personal Loan Balance Transfer?

Eligibility Required for Personal Loan Balance Transfer:

In order to avail the facility of personal loan balance transfer, the applicant must fulfill some basic eligibility criteria. They are as follows:

• The minimum amount of the outstanding loan must be Rs 50,000 or more to initiate the process.
• The repayment track record must be good. The bank generally checks the previous 12 installments.

SEE ALSO: 5 Golden Rules To Follow When Taking A Loan

Documents Required for Personal Loan Balance Transfer:

Self Employed:

• Duly signed application form
• Passport sized photograph
• Proof of age: PAN card, Driving License, Voter ID, Aadhaar Card
• Proof of identity: Driving License, Voter ID, Aadhaar Card
• Proof of address: telecom bill, electricity bill, rental agreement
• A Balance sheet with profit and loss statement (of previous 3 years)
• Bank statement (last 6 months)
• Statement of personal loan containing details of loan transfer

Salaried Person:

• Duly signed application form
• Passport sized photograph
• Proof of age: PAN card, Driving License, Voter ID, Aadhaar Card
• Proof of identity: Driving License, Voter ID, Aadhaar Card
• Proof of address: telecom bill, electricity bill, rental agreement

• Bank statement (last 6 months)

• Salary slip of previous 3 months
• Statement of personal loans from the current lender.

How Does Personal Loan Balance Transfer Work?

Banks allow the transfer of credit card accounts, personal loan accounts and home loan accounts. The process is easy and hassle-free and requires you to follow a few simple steps. You must submit an application requesting the transfer of loans to some other bank.

Once the request is raised, the bank will issue a NOC along with a statement that provides details of the loan amount and a letter of consent. The next step is to submit the documents to your preferred lender and wait for approval.

Your preferred bank will verify the documents submitted and then approve the transfer request, once they are satisfied with your track record. The new lender will sanction the outstanding loan amount to the previous bank for the closure of the personal loan. Once the transfer of the loan is complete, the former lender will provide all the documents to the new lender. The loan account will be closed and a new account will be opened with the new lender.

You must keep in mind that the transfer of the loan from one bank to another, means you are taking a fresh loan from the new bank. Therefore, while transferring your existing loan, you have to follow all the procedures like document verification, technical evaluation, payment of processing fees and CIBIL verification.

SEE ALSO: Things To Check Before Availing A Loan?

Things to Keep in Mind While Transferring Personal Loan:

• Processing fees and technical charges: Make sure to evaluate the different aspects of the loan like processing fees, valuation charges, legal charges and so on. Add all the charges along with the principal, the new rate of interest and compare it with your existing loan. This way you will be able to determine whether the transfer will reduce your total outflows.
• Collateral: In case you have repaid a large portion of your loan and are now making a transfer, then make sure not to pledge any collateral or security with the new bank.
• Terms and conditions: Make sure to carefully go through the terms and conditions specified by both banks involved in the transfer, to ensure a hassle-free loan transfer.

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