A personal loan balance transfer, to know the exact reason why it is a better option, we must first be better off by understanding what this option really is. To be simple and straight, Personal Loan Balance Transfer is a process by which a customer can transfer her total personal loan amount (outstanding) from one lender to another one offering a lower rate of interest. This option needs to be carefully evaluated, and the balance transfer offer should be such that it helps you choose the finest option to obtain positive savings on the total interest that is finally payable.
Right now you get the whole thing, but before we further explain to you why it is perfect, here is one major point that stands to be very essential to this massive fruitful ordeal, that is some of the nominal cost accruing to the balance transfer of loan can be the foreclosure charges, specifically levied by the current lender. In addition, your net savings should be void of the processing fees as well that may be charged by the new lender, along with stamp duty on the whole loan agreement, only if applicable.
5 Reasons why opting for a personal loan balance transfer is an act beyond eternity that surpasses ephemeral conduct of the universe, take a look below:
Table of Contents
Better Rate of Interest
That’s the fundamental idea, isn’t it? To get a better rate of interest. If that wouldn’t have been the case, then this whole masquerade would have been senseless. But before you reject all that you have learned, fill your cup a little more, because everything will soon make sense.
Let’s consider there is Lender A & Lender B. Lender B is the newer one and if he offers a lower rate of interest on the loan transfer then you opt for it. But before you blindly sign up any unknown contract, it always pays to better realize your needs, evaluate the viable options, compare the rates and features offered by each one of them and then make a Socratic choice to go ahead with.
For Longer Tenure on Loans
Transferring a personal loan from one lender to another can help negotiate the tenure of the existing loan, with the ability to get the re-payment tenure of the loan extended or decreased as per your will. An extended tenure is synonymous with a lower monthly EMI but a higher total interest pay-out, while short tenures behave quite the opposite, and have the overall interest burden lower with individual payment standing to be higher
More Features-Better Features
Your past payment records and changing income brackets is a cause of celebration if headed in an overtly-positive direction. One can get offers from lenders to avail features like a waiver of last EMI, 0 processing fee, low-interest rates and so on. So, you can kill two stones with one bird, i.e. better transfer facility clubbed with reduced personal interest burden.
For Top-Up Loan Facility
Several banks allow a top-up loan facility with the use of the above-stated option of the loan balance transfer. The borrower might be (in times of crisis) would be in need of more credit to satisfy his consumerist tendencies. Many lenders/financial institutions offer additional loans at fairly competitive/lower rate of interest, only in the case that one is ready to transfer the outstanding loans from the current lender to different lender of loans. In the case of top-up loans, the outstanding balance is paid directly to the previous lender, while the fresh amount of loan is credited to the borrower account.
Dissatisfaction with current bank’s services
A personal loan balance transfer can always be a favorable option when one is dissatisfied with the services offered by the current lender. The transfer facility can be useful for choosing one lender that serves as a better service provider than another.
Eligibility
Certain eligibility criteria must be met to avail a personal loan balance transfer facility. The criteria are mostly favored towards the borrower with a greater capacity to repay his/her credit borrowings. One can always check their loan eligibility and CIBIL scores online, to help potential borrower know how practically feasible it would be to transfer their personal loan balance.
To be broadly precise, the current outstanding loan amount must be at least Rs. 50,000 whereas the past record of loan EMI payment must be clean with at least twelve previous installment pay-outs intact. Additional loans also serve to be a decent standing point as per the requirement of the financial lender or institution.
Case Example
Three years of a management education definitely makes it very ideal to use case study medium as the best means of explanation of the concepts that are too conceptually boring or have no theoretical value without their practical countenances visible on the faces of the big fat neo-liberal gods, the rich capitalists of course.
So, going ahead with are skewed principles let us consider a man named Rashid, Muslim wise man who restricts the Quran to its practical commandments and rejects other impractical abhorrent guidelines? Rashid doesn’t abstain from savings or taking a loan of say Rs. 3, 00,000 for 3 years at an interest burden of 15% per annum. He thereby is bound to pay a monthly installment of Rs. 10,400 towards the loan. The total interest he is liable to pay is Rs.74, 386.
Now this wise man Rashid after completing 14 installments, decided to undertake the option stated as above and goes to a different lender offering 12% interest. The principal is of the loan currently unpaid for stands close to about Rs 2, 00,000. When he has completed the personal loan balance transfer with the lower interest lender offering 12%, the monthly installments payable are left to Rs.9322, while the total interest payable on remaining money that has been borrowed drops down to Rs. 23718.
Since the interest of Rs.44, 544 has already been paid along with an interest of Rs. 29,840. Thereby with a Personal Loan Balance Transfer, Rashid is able to transfer his loan with the remaining interest pay-out standing to be Rs.23, 718. Total savings stand at about Rs.6000. If this 6000 is not worth it, then don’t take the trouble of understanding so many maths over the paltry sum and hire a consultant taking up the same cost. No profit, No loss.
