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 need 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.
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 interest rate on the outstanding loan amount. Hence, a Personal Loan transfer's primary purpose is to decrease the debt burden.
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 the borrower to provide any collateral.
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.
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 first advantage of a Personal Loan balance transfer facility is that the interest rate is decreased, lowering the borrower’s interest burden through lowered EMIs. Generally, the new lender will offer a lower interest rate on the loan transfer.
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.
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.
Most banks allow a top-up facility along with the Personal Loan transfer. Many banks and financial institutions offer new loans and top-up Personal Loan facilities at competitive and lower interest rates.
Personal loan refinancing involves taking out a new loan to pay off an existing one. It is often done to secure a lower interest rate, reduce monthly payments, or adjust loan terms. This process can help manage debt more effectively and potentially save on overall interest costs.
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 the Personal Loan transfer calculator to know what to expect.
Before you make your decision to refinance, evaluate the following:
HDFC Bank offers loans with EMIs starting at ₹2,144 per lac*.
Now, you will be in a better position to make a decision.
Read more on how to close a Personal Loan successfully for your next loan application.
* 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 circumstances.