Personal Loan Balance Transfer

• Lower Interest Rate: One of the key features or benefits of the transfer of a personal loan balance is that it also provides a better/lower interest rate. A lower rate of interest on the loan transfer would normally be offered by the new lender.
• Longer repayment period: Balance transfer often also helps you to renegotiate the terms of the loan, such as having your loan repayment tenure extended by the new lender. The monthly EMI pressure will be minimised by this.
• Additional features available: You can get an offer from other lenders for better loan features such as waiver of last EMI, zero transaction fees, lower interest rates, etc. depending on your past payment record and changing income dynamics.
• Top-up Loan Facility: Together with a personal loan balance transfer, many banks allow a top-up loan facility. If the borrower wants more credit, it is also possible to consider opting for a balance transfer. At a favourable and comparatively lower rate of interest, many lenders or financial institutions may provide top-up personal loans.
• Great Services: Personal loan balance transfer most often helps you to receive better services if the services provided by the current lender or financial institution are not happy with you.

Eligibility Criteria for Personal Loan Balance Transfer

For the balance transfer of personal loans to most banks, some common conditions that apply include:

• To start the balance transfer process, the current unpaid loan sum has to be at least Rs. 50,000.
• The previous record of loan EMI payment record must be clean. It will review at least the previous twelve instalment payouts of the current loan.
• In good faith, one or more additional loans/credit cards according to the new lender or financial institution’s requirement.
• CIBIL Score, usually 700 or above, as required by the bank.

Documents Required for Personal Loan Balance Transfer

Some common documents that may be needed to be submitted by the borrower if he or she wishes to opt for a transfer of balance are as follows:

• Properly signed application form for the transfer of personal loan balance along with passport size photograph.
• Address Proof (Aadhaar Card/Passport/ Landline Bill/ Latest Electricity bill/Rent agreement etc)
• Age Proof (PAN card/driving license/passport/voter ID/Aadhaar Card, etc.)
• Identity Proof (PAN card/driving license/passport/voter ID/Aadhaar Card, etc.)
• PAN Card copy (Mandatory)

The following are some of the main documents that are unique to salaried and self-employed people:

For Salaried Individuals:

• Salary slip of last 3 months
• Bank statement of last 6 months
• Personal loan statement from a current lender (for the loan that has to be transferred)

For Self Employed Individuals:

• TAN Card/GST number
• The last 6 months of individual and business entity bank statements
• Balance sheet for the last 3 years along with business benefit and loss statements
• Current lender’s statement of a personal loan (loan information that needs to be transferred)

Process of Personal Loan Balance Transfer

Personal loan balance transfer process includes the following steps:

• Confirm the present interest rate with other lenders that you can get on your personal loan and measure the interest savings.
• Calculate the expected cost of the transfer of the loan, taking into account the different charges and fees that might apply.
• Evaluate the net advantages and finalise whether or not you want to opt for the shift of the balance. Shortlist a few creditors to whom you may want to transfer your current loan.
• Compare the personal loan interest rates provided by the lenders shortlisted, the eligibility of your loan amount and their loan procedure.
• After you finalise the new lender and plan to continue with the transfer, request your existing lender for a NOC (No Objection Certificate) and foreclosure letter.
• Start with the new lender in the application process. Send the records of the loan along with the full record of repayments.
• Receive a letter of sanction and conduct the new loan agreement with the new lender.
• Take a disbursement from the new lender by cheque/demand draught in support of the previous lender.
• Once the previous lender collects the unpaid loan sum, all the cheques and ECS will be cancelled and the personal loan account will be locked.

Personal Loan Balance Transfer Charges

Depending on your current bank and the new bank, the charges involved in moving the unpaid balance of your existing personal loan to a new lender can vary. The foreclosure charges that you need to pay to your current lender and the processing fees that you need to pay to the new lender are two important charges involved in a personal loan balance transfer.

• Foreclosure costs: In order to take over your personal loan, foreclosure charges ought to be charged to the current lender. With different lenders, the rate can vary from zero to up to 4% of the principal outstanding. However, depending on the loan agreement, some lenders may charge a flat fee or a higher charge.
• Processing fees: This must be paid for the processing of your personal loan request (on transfer) to the new lender and can range from a flat fee of Rs. 500 to 4 per cent of the value of the loan.

Calculation of Personal Loan Balance Transfer

If you opt for a balance transfer, you can use any of the free personal loan balance transfer calculators available online to measure the monthly EMIs and the cumulative interest payable. If you opt for a balance transfer, you will equate the interest due on your current loan with the interest payable.

Illustration of Transferring Balance of Personal Loan

An example of how a personal loan balance transfer could help you save on the total interest payable is given in the following table: