Personal Loan: Calculate refinancing costs when deciding and personal loan balance transfer

Personal Loan: Calculate refinancing costs when deciding and personal loan balance transfer


Your cash flow becomes limited during an emergency. At a high-interest rate, you take a personal loan from a financial institution when you are in desperate need of money. You are now, though, searching for ways to reduce the pressure of the loan, reduce the EMIs, and breathe comfortably. Here comes the solution, Personal Loan Balance Transfer.

Personal Loan Balance Transfer Definition

A Personal Loan Balance Transfer is a mechanism in which the entire unpaid personal loan is moved from one bank to another by a customer. It happens when a new bank gives a lower rate of interest on the outstanding loan amount. So the main purpose of a Personal Loan transfer is to decrease the overall burden of debt.

The Personal Loan Balance Transfer deal has to be analysed meticulously. The debt transfer process does not require that the borrower should submit any collateral. For the Personal Loan balance transition, charges will include foreclosure, processing fees and stamp duties on the loan. People can also make use of a personal loan calculator for better results. 

How does the transfer work?

What usually occurs in a personal loan transfer from one bank to another is that your new one pays off the current loan. You will have to face those costs if the existing loan comes with a prepayment clause and the processing costs on the new loan.

What are some of the benefits of a personal loan balance transfer?

Enhanced Interest Rate: The first advantage of a transfer facility on a personal loan balance is that the interest rate is minimised, which in essence decreases the burden of the borrower by reduced EMIs. Generally, a lower interest rate on the debt conversion is given by the new lender.

Extended Loan Duration: When a transfer from one bank to another is carried out, it is possible to negotiate the tenure of the original personal loan. Depending on the conditions, you will get the maturity term of the loan either extended or reduced. The EMI and the interest strain are correspondingly rising and declining.

Greater Features: This benefit relies on your prior payment record, your CIBIL score and the patterns of income that are continually evolving. Some lenders may offer zero transaction costs, a lower interest rate, the last EMI waiver, and so on. The personal loan balance transfer can not only reduce the interest pressure of the personal loan, but the lender in the contract can also provide better loan features.

Loan facility increment: Most banks allow a top-up facility and new loans along with the transfer of a personal loan at affordable and lower interest rates.

What should you choose: refinancing or Balance Transfer of credit?

Decision making

Refinance is a fantastic choice in the early years of your loan, if available. That is when the interest component is highest in your EMIs. The interest component steadily gets smaller.

Consider the following before you decide to refinance:

Prepayment penalty with an existing bank and transfer costs with the new bank.

Make a cost-benefit analysis of savings on this process.

The status of the new EMI

Eligibility criteria to avail the transfer facility

You have to meet specific qualifying requirements to move your personal loan from one bank to another. Eligibility for the conversion of personal loan balance depends on your borrowing ability and the creditworthiness to repay the loan. The main parameters that are typical are as follows:

The borrower must have an ongoing personal loan from another bank.

For the balance transfer process, the remaining loan amount should be at least ₹50,000.

The personal loan transition includes a clean EMI payment track record of at least 12 months.

High CIBIL Ranking, usually score 700 and above, as required by bank policy.

What are the documents required?

Completed application form with photograph of passport size duly signed

Evidence of identity and age (PAN card/visa, driving license/Aadhaar card/voting id card)

Electricity bill/ mobile bill/ Aadhaar card/ rental arrangement (address proof).

Salary slip for the previous three months and bank account statement for the last six months.

Personal credit declaration of the loan to be converted.


Depending on your current bank and the new bank, charges for moving your loan vary. Main charges for the transfer of loans require foreclosure fees to be charged by your current bank and processing fees to the new bank.

Foreclosure payments on the takeover of personal loans are owed to existing banks. These rates can range from zero to up to 2 percent from bank to bank.

Processing fees are due upon conversion to the new bank and can range from a flat charge of up to ₹ 999 to up to 2% of the loan sum. Banks, though, provide discounts on payment fees from time to time, and you can search with online financial markets such as My Loan Care for enticing deals to get the best offer for a personal loan balance transfer.

Conclusion: Transferring the balance of your loan is a financially prudent step. There is no need to pay heft interest and increase burden unnecessarily. Apply for Personal Loan transfer as early as possible.

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