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Sam Ghosh Founder and SEBI Regd. Investment Adviser at Wisejay Private Limited Bangalore, Karnataka
How to transfer Loan Balance to another lender?
1 answer/comment
09:24:07 AM, 13th May, 2019
  • Sam GhoshFounder and SEBI Regd. Investment Adviser at Wisejay Private LimitedBangalore, Karnataka
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    Consider you have a loan with a considerable outstanding balance. Now, you came across loan offers with lower interest rates and better features. Another situation can be that when you took the loan you decided a shorter tenure but now your financial circumstances have changed and you want a lower EMI.

    Loan Balance transfer or refinancing can help you achieve the above goals.



    BENEFITS OF LOAN BALANCE TRANSFER

    A lower EMI is often the most influencing factor transferring a loan balance but there can various other reasons. Let us look into them.


    1. Lower interest rate

    A lower interest rate means lower EMI leaving other things unchanged. A lower interest rate even by a small amount can mean a substantial amount of savings for a comparatively long loan term.


    2. Longer or Shorter loan tenure

    A borrower may find the EMI unaffordable and want to lower it. A longer tenure reduces the EMI although increases the total interest payable in the life of the loan. The new lender may allow the borrower to extend the loan tenure.

    The opposite can also happen where the borrower wants to pay back the loan quickly by paying higher EMI but the current lender refuses to allow that.


    3. Top-up Facility

    Many lender offer top-up (more credit) at competitive and relatively lower rates at the time of loan balance transfer. Also, the documentation required for the top-up amount can be minimal compared to a fresh loan.


    4. Better Features

    Many lenders may sweeten the deal with lower (or zero) processing fee, waiver of some EMI etc.


    5. Better Customer Service

    One of the reasons for loan balance transfer may be simply dissatisfaction with the customer service provided by the current lender.



    COST ASSOCIATED WITH LOAN BALANCE TRANSFER

    While there can be various benefits of a loan balance transfer, a borrower should not ignore the costs associated with the balance transfer. There can be various costs such as stamp duties, processing fee, documentation charges etc.

    Ask both your current and potential lender about the costs of such transfer before making a decision.



    PROCESS

    The process starts with taking consent from the existing lender with documents required to make the refinancing application.

    With the documents provided by the current lender and other documents required by the new lender (such as identity proof, address proof, income proof etc. ) you need to apply to the new lender.

    If the application is accepted, the new lender will transfer the outstanding loan amount to the old lender and the old lender will close the loan account.

    The old lender will also hand over any loan-related documents such as pledge, property documents, financial securities etc. if the loan was secured by assets.

    The new lender will process the loan application and you can start paying EMI to the new lender.

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