Individuals take out personal loans to cover unplanned expenses. Most financial institutions provide unsecured personal loans to eligible applicants. Although these loans allow you to get funds when you are in need, the loan interest rates are higher than those of secured loans.
Individuals dealing with rising interest rates on their personal loans may find a loan transfer facility to be a suitable option. Nowadays, almost all financial institutions provide the facility for personal loans. If you are seeking to switch lenders for personal loans, here is a small guide to help you learn more about this product.
Personal Loan Balance Transfer: 5 Key Points
Before applying for a loan balance transfer from a new lender, there are a few things to consider. They are as follows:
Interest Rate Benefit
One significant benefit of loan transfers is that the loans issued by the new lender are typically at low rates. This contributes to a lower interest cost and, as a result, cheaper EMIs. However, it is essential to note that before submitting a loan application, you must assess the new offer and compare the rates.
Top-Up Loan Facility
Another advantage of loan transfer is the top-up loan option provided by the new lender to qualified candidates. You might request additional funding to help you get over a financial difficulty. These loans are frequently available at affordable interest rates. However, before applying for a loan, compare the various interest rates charged by banks and choose the best bank for a personal loan.
Although paying your loan over a shorter time helps you get out of debt faster and at a cheaper interest payout, you must negotiate with your lender if this is not an option. On your existing personal loan, you can request an extension of the loan term. This allows you to pay cheap EMIs for longer tenure that matches your budget. Thus, loan tenure can be extended or shortened to suit your convenience with the loan transfer feature.
Evaluate the Cost-Benefit
It is not always profitable to choose a loan balance transfer. Therefore, it is recommended to seek out a new lender during the first stage of debt repayment. During this period, the interest component of the overall EMI is greater than the principal component, making it financially prudent to choose for loan transfer early.
Furthermore, new banks may levy additional fees for loan transfers, such as processing fees and other charges. As a result, depending on the costs involved above, it is vital to evaluate if it is better to choose a new lender or stick with the existing one.
Read the Fine Prints
Before applying for a personal loan balance transfer from a new lender, you must thoroughly examine the agreement terms. Also, try to bargain for additional benefits such as a waiver of processing costs or any hidden charges. Before consenting to the terms and conditions, it is best to study all loan-related papers carefully.
In an emergency, personal loans are simple to secure. However, it is not always a viable choice for lowering the interest cost. As a result, it is crucial to analyze all the costs involved and only opt for the loan balance transfer option if it results in considerable savings.