According to TransUnion CIBIL reports, the delinquency rates for housing loans have increased by 13 bps on a year-on-year basis for the quarter ended in September 2020. This is a worrying trend, and defaulting home loan EMI can be a concern for borrowers, as it has lasting effects on their credit history.
One of the main reasons behind such incidents is the high interest rate and unfavourable loan terms. Nevertheless, instead of carryings the burden of payment default, debtors can opt for a home loan transfer. They can select a lender offering better interest rates and favourable loan terms.
However, it is vital to time this transfer appropriately to ensure optimal benefits. For this purpose, one needs to consider a few things in advance.
Top 5 points to remember before opting for a home loan transfer
- Consider the interest rate
The main reason to opt for a balance transfer is to avail a more competitive interest rate. Hence, the first point to consider before opting for one is the rate of interest on offer.
Borrowers can perform thorough market research to find the financial institution offering the lowest home loan rates. They can also negotiate with the lender to secure the best possible deal.
- Evaluate the timing
Typically, the loan repayment structure directs borrowers to pay the lion’s share of the interest in the initial months or years. In such a period, the principal payment remains negligible.
Since, with a home loan refinance, individuals mostly save on interest payment, undertaking the same during the initial months or years of repayment ensures maximum benefits.
Contrarily, opting for a balance transfer in the last phase of home loan repayment does not make any sense, as borrowers have already paid a significant share of their interest due. Hence, they will not benefit much from a lower interest rate.
Keeping this in mind, they can check their amortisation sheet to understand the EMI break-up and opt for a transfer accordingly.
- Consider the associated costs
Since home loan transfer means foreclosing the previous one and beginning repayment with a new lender, it will include various charges. Foreclosure charges, processing fees, legal fees, etc., are some of the common ones.
Taking these additional costs into account is vital while planning for a home loan balance transfer. Since debtors are looking to save on repayment, if these charges are overwhelming, then they may not end up saving as substantial an amount as they expected.
Borrowers can take the assistance of a home loan balance transfer calculator to find out the exact amount they can save with this process.
- Additional offers
Financial institutions often extend additional benefits with a home loan balance transfer like a top up loan. This additional fund comes with no-end use restrictions, which allow individuals to fulfil their urgent financial needs.
Also, reputed financial institutions provide pre-approved offers that streamline the loan application process and saves time. It is applicable to financial products like loan against property, home loans, etc. Borrowers can check their pre-approved offer by submitting their contact details.
- Loan terms
Furthermore, before opting for a home loan transfer, it is vital to read its fine print and learn more about it. It will help borrowers to avoid future complications and make an informed decision.
Home loan transfer provides a convenient way to reduce the loan burden and helps homeowners to repay their debt with ease. However, it is vital to time it perfectly and be aware of the reasons why individuals should choose a home loan transfer to enjoy its benefits.
Read Also: Know the advantages of Home Loan Transfer