How Personal Loan Balance Transfer Works?
Last Updated : March 15, 2019, 4 p.m.
When it comes to a personal loan balance transfer, it is a process of transferring your existing outstanding personal loan balance from one loan provider to another, offering a lower interest rate. In simple words, now you just have to pay your EMIs to the bank, you have transferred your loan to, at the new and lower interest rate. Now if we go into the technicality and let you know how this entire process works, all you need to do is just read the points below:
Process of Personal Loan Balance Transfer
If you are someone who wants to go for a personal loan balance transfer, take a look at the procedure below:
- Check the current interest rate for your personal loan that you can get and calculate interest savings.
- Calculate the estimated cost of loan transfer on account of various fees and charges.
- Calculate net benefits and decide if you want to transfer your loan or not. Shortlist new banks that you wish to transfer your existing loan to.
- Compare and check their interest rate offers, your loan amount eligibility and their loan process.
- In case you decide to go ahead with the transfer, apply for a NOC and foreclosure letter from your existing bank.
- Apply for a loan at the new bank, submit your loan documents with complete repayment record.
- Obtain a sanction letter and execute the new loan agreement with the new bank.
- Take disbursement from the new bank by way of cheque/ demand draft in favor of an existing bank and deposit the same with the existing bank.
- On receipt of a loan outstanding, your existing bank will cancel all the cheques and ECS and close your loan account.
Personal Loan Balance Transfer Charges
Charges to transfer your personal loan can be different depending on your existing bank and the new bank. Key charges for loan transfer include foreclosure charges to be paid to your existing bank and processing fees.
- Foreclosure charges are payable to an existing bank for taking over of personal loans. Usually, foreclosure charges range up to 5% of the principal outstanding.
- Processing fees are payable to the new bank on transfer and may range from a flat fee Rs.999 to up to 2% of the loan amount.