When an emergency strikes, your cash flows are constrained. You take a Personal Loan from a financial institution at a high-interest rate because you are in dire need of funds. However, you are now looking for ways to lower the interest burden, reduce your EMIs and breathe easy. Is it possible to do a loan transfer?
The answer to this is Personal Loan balance transfer or refinance.
What is a Personal Loan balance transfer?
A Personal Loan balance transfer is a process wherein a customer transfers the total outstanding Personal Loan from one bank to another. It usually happens when the new bank extends a lower rate of interest on the outstanding loan amount. Hence, the primary purpose of a Personal Loan transfer is to decrease the overall burden of debt.
One needs to meticulously assess the Personal Loan balance transfer offer and choose the best one to save on the total interest payable. The loan transfer process does not require any collateral be provided by the borrower. A few nominal charges for the Personal Loan balance transfer would entail foreclosure charges, processing fees and stamp duty on the loan agreement (if applicable).
For instance, if you approach HDFC Bank for a Personal Loan transfer, HDFC Bank will take over the loan from your existing lender and offer you a competitive loan and interest rate. You will have to pay all your future EMIs to HDFC Bank.
HDFC Bank has some great Personal Loan balance transfer offers, including an affordable interest rates and lesser processing fees.
You can also opt for an HDFC Bank loan transfer if your financial circ*mstances have improved and you want to increase or decrease your loan tenure or EMI, and your current bank is unwilling to accommodate you.
How does Personal Loan balance transfer work?
What typically happens for a Personal Loan transfer from one bank to another is that your new bank – HDFC Bank in this case – pays off your existing loan. If your current loan comes with a prepayment clause, you may have to incur those charges. Also, you may have to pay the processing fees for your new loan. However, with a lower rate of interest, your savings would increase, and it would compensate for these charges.
The Benefits of a Personal Loan balance transfer:
Enhanced Rate of Interest:
The first advantage of a Personal Loan balance transfer facility is that the rate of interest is decreased, which in turn lowers the borrower’s interest burden through lowered EMIs. Generally, the new lender will offer a lower rate of interest on the loan transfer.
Extended Duration on the Loan:
When a Personal Loan transfer from one bank to another is carried out, the tenure of the existing Personal Loan can be negotiated. You can get the repayment period of the loan either extended or lessened depending on the requirements. The EMI and interest burden increase and decrease accordingly.
Greater Features:
This benefit depends on your past payment record, your CIBIL score and the ever-changing income dynamics. Some lenders may provide loftier features such as zero processing fees, a lower rate of interest, waiver of the last EMI, and so on. The Personal Loan balance transfer facility cannot only reduce the Personal Loan interest burden, but the borrower may also obtain better loan features in the bargain.
Would loan refinance be a better option or a loan transfer?
Making the decision
Refinance is a great option, if available, in the early years of your loan. That’s when the interest component in your EMIs is the highest. The interest component progressively becomes lower. You can also use thePersonal Loan transfercalculatorto know what to expect.
Before you make your decision to refinance, evaluate the following:
HDFC Bank offers loans with EMIs starting as low as Rs 2,144per lac*.
Now you will be in a better position to make a decision.
Readmoreonhow to close a Personal Loansuccessfully for your next loan application.
You can apply forpersonal loanhere.
* Terms & conditions apply — Personal Loan disbursal at the sole discretion of HDFC Bank Ltd. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circ*mstances.
FAQs
What is a Personal Loan balance transfer? A Personal Loan balance transfer is a process wherein a customer transfers the total outstanding Personal Loan from one bank to another. It usually happens when the new bank extends a lower rate of interest on the outstanding loan amount.
What is personal loan balance transfer? ›
A Personal Loan Balance Transfer, as the name suggests, is a type of loan wherein you can transfer the Personal Loan to another bank. It basically means that you can transfer the outstanding amount of your existing Personal Loan from one bank to another.
Can you refinance a personal loan from a bank? ›
Generally, you can refinance a personal loan once you start making payments. But be sure to check your current loan's terms for any restrictions preventing you from refinancing. Deciding whether to refinance a personal loan will likely depend on your unique financial situation.
Is refinancing a personal loan worth it? ›
Key takeaways. Ideally, you should refinance a personal loan only if you can secure a lower rate and save money without extending your repayment term. If your credit score has improved since taking out the original loan, you may have a better chance of qualifying for a more favorable rate.
Should I use a balance transfer or personal loan? ›
Balance transfer cards are better if you have small amounts of high-interest credit card debt, since the intro APR is relatively short and regular APRs can be high. Personal loans are better if you have a large amount of debt because they have a lower fixed APR and generally offer a longer period to pay off debt.
Do balance transfers hurt your credit? ›
A balance transfer can improve your credit over time as you work toward paying off your debt. But it can hurt your credit if you open several new cards, transfer your balance multiple times or add to your debt.
Is balance transfer of loan a good idea? ›
The Benefits of a Personal Loan balance transfer:
The first advantage of a Personal Loan balance transfer facility is that the rate of interest is decreased, which in turn lowers the borrower's interest burden through lowered EMIs. Generally, the new lender will offer a lower rate of interest on the loan transfer.
Does refinancing hurt your credit? ›
Key takeaways
Refinancing can affect your credit score for up to one year while remaining on your credit report for up to two years. To best protect your credit, continue to make timely payments on your accounts and comparison shop within a 45-day window to limit the number of hard credit checks on your credit report.
What's the downside to refinancing? ›
Refinancing allows you to lengthen your loan term if you're having trouble making your payments. The downsides are that you'll be paying off your mortgage longer and you'll pay more in interest over time. However, a longer loan term can make your monthly payments more affordable and free up extra cash.
When you refinance a loan, what happens? ›
Key Takeaways. A refinance occurs when the terms of an existing loan, such as interest rates, payment schedules, or other terms, are revised. Borrowers tend to refinance when interest rates fall. Refinancing involves the re-evaluation of a person or business's credit and repayment status.
5 Ways To Pay Off A Loan Early
- Make bi-weekly payments. Instead of making monthly payments toward your loan, submit half-payments every two weeks. ...
- Round up your monthly payments. ...
- Make one extra payment each year. ...
- Refinance. ...
- Boost your income and put all extra money toward the loan.
You should have a credit score of 580 or higher to qualify for a $6,000 personal loan.
Do banks benefit from refinancing? ›
When people refinance, they change the terms of their loan with their bank or lender so they are paying a lower monthly interest rate. While that means less in loan payments for lenders, homeowners must pay application and closing fees to get this deal, which is immediate revenue for those lenders.
What is the downside of a balance transfer? ›
You could make the problem worse
The truth is, with a balance transfer card, you're simply moving money around without improving your debt problem. In fact, if you don't practice good financial spending and repayment habits, you could make the problem worse.
When should I not do a balance transfer? ›
If you can't repay your debt in the promotional period, are nearing the finish line on total debt repayment or are planning on applying for major financing soon, a balance transfer may not be a good move.
Is it hard to get approved for a balance transfer? ›
The bottom line
Qualifying for a balance transfer card for bad credit can be challenging. There's a good chance you'll only be eligible for secured credit cards, which require a cash deposit, so you may be better off simply putting that cash toward paying off your debt.
Is it a good idea to do a balance transfer? ›
If you need extra time to pay off a big credit card purchase, transferring the balance to a balance transfer card can be a smart move. If you manage to pay off your balance before the intro period ends, you can successfully dodge interest that may otherwise have been added to your balance.
Does personal loan balance transfer affect credit score? ›
Make Full Payments on the New Account
But if you fail to pay the dues on time, a balance transfer can substantially reduce your credit score as the new account has a significant amount.
How exactly do balance transfers work? ›
A balance transfer lets you move the unpaid balance from one or more credit cards to a new credit card by using paper checks, online banking or even a mobile app to pay those outstanding balances.
What is a balance transfer in personal finance? ›
A balance transfer credit card moves your outstanding debt from one or more credit cards onto a new card, typically with a lower interest rate. Many balance transfer credit cards feature a low or 0% introductory APR, allowing you to save money on interest payments.
