A majority of the common population is unversed with the benefits offered by a personal loan and its features. The balance transfer option is one such feature that is highly beneficial for borrowers, but most of them have never used the same. The idea of a balance transfer option with personal loans is to help the borrowing party find better deals and interest rates.
It can significantly reduce the outgoing expenses on account of EMIs and other processing charges levied by the lending party. Let’s take a deep dive into what a loan balance transfer is and how it works.
Simply put, the balance transfer option allows one to transfer the outstanding loan amount from one lender to another who’s offering better terms for the same. The most common reason why people indulge in a loan transfer is because of a lower interest rate. A reduced interest rate means lower EMI payments and more savings on your loan.
One of the biggest advantages of a personal loan that makes it very suitable for a loan balance transfer is that it’s collateral-free. Since there is no security involved, it’s easier to conduct the balance transfer process to another party. There are only some minor changes that need to be made in the entire process, which is handled by the new lender.
There are several important benefits of conducting a personal loan transfer. Some of the most prominent ones are listed below.
One of the primary reasons why people conduct a personal loan balance transfer is because they are getting a lower interest rate at another financial institution. Most customers conduct their research and compare plans from different banks for borrowing money. However, many a time, they fail to evaluate all available options and might reconsider their position at a later time.
One can easily transfer the outstanding balance to another lending party for a lower interest rate which will also reduce the EMI balance. It is important to use a personal loan interest rate calculatorto know the exact amount you will pay on account of interest to the new party.
Another important benefit of conducting a personal loan balance transfer is that a borrower has the option to increase the loan tenure. This means that you will have a longer period to repay your outstanding loan. It might not reduce your outstanding balance; however, it will reduce the financial burden for each month as you will be paying a lower amount for EMI.
Most financial institutions offer a 60-month repayment tenure for personal loans. However, this might vary depending on your loan provider. You can even choose to decrease the loan tenure without any prepayment charges while doing a balance transfer.
Most people are on the lookout for better terms and features related to personal loans. New-age financial institutions have opened more doors for borrowers. They have a more customer-centric approach and also have the option to customize services based on the customer’s needs.
For example, a different loan provider might have the option to allow part payments and offer zero prepayment charges and a customer might feel comfortable with this option. This provides a reasonable option to change your lending party through a balance transfer.
4. Better Technological Infrastructure
There is no doubt that modern age financial institutions are addressing all the challenges of the traditional system. This has led to a customer-centric approach to delivering financial services. A better technological infrastructure that adds to the convenience of the borrower provides for a reasonable ground to change their lender.
Today, most service providers have a digital infrastructure that makes it more convenient for the customer to repay the loan through EMIs. It is also highly transparent and makes it easier for customers to access important information related to their loans.
How to Transfer Your Balance to Another Lending Party?
The exact process for transferring your outstanding loan amount to a different party might vary depending on your loan provider. However, most financial institutions have a very similar process that is mentioned below.
- Once you have finalized a different loan provider, the first step is to obtain a NOC and a foreclosure letter from the current lending party.
- The next step is to make your application to the new lender and submit all the required documents and repayment records of the loan being transferred.
- Now, you will need to obtain the sanction letter and the loan agreement.
- After the loan is disbursed, you will need to deposit a cheque or demand draft with the outstanding loan amount to your previous provider
When the outstanding amount is received by the last lender, they will cancel your ECs or cheques and close your loan account.