People generally have the proclivity to opt for a personal loan in times of need. You must pay back the loaned amount timely. However, at times, it becomes difficult paying the instalments of these loans. You feel padlocked in such situations and do not understand how to make ends meet. But there is a way to turn this around through Personal loan balance transfer.
It is the process by which you can transfer your current debts to another bank or another loan provided by the same bank, whichever offers a lower rate of interest on the outstanding amount. Even if you are not in a financial crunch, you can opt for loan transfer if you find another loan option offering a lower interest rate to reduce your payable burden. This not only works for your existing personal loan balance but also for your credit card balances.
How does the personal loan balance transfer work?
If you are determined to opt for a loan balance transfer, you can follow the given procedure.
Check the interest rate and charges
Check the Personal Loan interest rates of different banks and avail the most feasible option. You also need to check the charges levied on the personal loan balance transfer of the existing bank and the new bank. Select a bank that is more pocket friendly. Here are the charges you need to pay.
Foreclosure charges
The rate of foreclosure charges may vary from 0%-4% on the main outstanding.
Processing fee
This is the fee you need to pay to your new lender for processing the transfer. This can vary between Rs. 500 to 4% of the loan amount.
Evaluate the net results
Before opting for a transfer, make sure to evaluate the overall benefit of the transfer. It should prove to be beneficial for you. Make a list of your options and compare their interest rates. While comparing, make sure you consider the loan tenure.
Know the eligibility criteria
In order to transfer your personal loan you have to meet certain criteria. This mainly depends on the borrowers’ ability to repay and their credit profile. Banks allow a credit transfer when your credit score is at least 700 or above. Also, you must have a clean record of EMI payments, in order to avail the transfer facility.
Keep your documents ready
While transferring your loan balance you need to have certain documents. Some of the common documents that you need to provide, include your signed application form with a passport size photograph, identity proof, age proof, address proof, and a mandatory copy of your PAN card.
Besides, there are other documents required based on whether you are a salaried or a self-employed individual.
Salaried people
You need to have the income slip of the last three months, personal loan statement from your present bank and the bank records of the past six months.
Self-employed people
If you are a self-employed person, you need to submit your GST number, past six months’ bank records of the business enterprise and your individual account. You also need to produce the profit and loss statement in addition to the balance sheet of the past three years. Besides these, you need to submit a personal loan statement from the present bank.
Inform the existing bank
After finalising your option for the transfer, the foremost step is to inform your current lender. Collect an application for a NOC and a foreclosure letter from your bank.
Start the application process
You can begin the application process with the new bank once you have informed your current lender. All you need to do is submit the records of your repayments along with your documents.
Get the transfer approved
After filling all your documents, obtain the sanction letter. The moment you get your transfer approved you can execute the new agreement with the new lender.
Pay off your existing loan amount
You need to pay off your existing bank and close the account. To do so, you can take a disbursement from the new bank, in the form of demand draft or cheque and deposit the amount in the previous bank. The bank will cancel your ECS and cheques after receiving the outstanding loan amount. Your account in the previous bank will be closed.
Lenders will tempt you with attractive offers to opt for a personal balance transfer. It is always better to choose what you think is best for you. While balance transfer reduces your EMIs, it will be of no good if you are unable to make payments on time or do not have a good debt-repayment plan chalked out.
