How to Make a Personal Loan Balance Transfer Easily
What do we do when there is an urgent need for cash but no way to go about it? Ask a friend for help. If it were the conventional days with lesser digitisation, that would be the first option we think of. Today, we would rather take out a personal loan that is so easily available. There are also several other features, such as a personal loan balance transfer.
What is the meaning of this balance transfer? How does it really work? That is exactly what we are going to be talking about here.
What is a Personal Loan?
A personal loan is a debt you take from a bank or financial institution when you want money for personal expenses. This loan gives you easy access to funds and repayment options that are quite affordable. All you need is a set of basic documents and bank details to get started. Personal loans also have a sum of interest charged based on the provider’s internal policies.
The other aspect of a personal loan is that you will have to repay the amount (principal + interest) in EMIs. You can use a personal loan EMI calculator to understand how much EMI you need to pay on a particular loan amount at different rates of interest based on different providers.
What is a Personal Loan Balance Transfer?
A balance transfer is when you transfer a personal loan from one bank to another. In this way, the personal loan account of the current bank will be closed, and you will repay the remaining loan amount to the new bank to which you transferred the loan.
Let us understand with an example how a personal loan balance transfer works:
For instance, if you have taken up a personal loan of Rs. 5,00,000 from a financial institute, and the EMI you pay each month is Rs. 10,000. You have successfully paid the EMIs for a period of time, and you have Rs. 3,50,000 as the pending loan amount.
Another financial institute offers you the chance to pay an EMI of Rs. 7,000 each month for a balance transfer of Rs. 3,50,000. You can transfer the balance loan to this provider. The new financial institution will reimburse the loan amount at the old bank account and close the loan account. After that, you can pay the next EMIs of Rs. 7,000 to the current financial institute/bank for the existing loan amount of Rs. 3,50,000.
How Do You Make a Balance Transfer of Your Personal Loan?
Making a balance transfer is simple and not that hard. Just have a look at the steps given below to understand how:
Step 1: You have a loan of Rs. 10,00,000 from ABC Bank at the rate of 14% p.a, of which you have already paid Rs. 2.5 lakhs.
Step 2: Bank XYZ offers you a loan/balance transfer option of Rs. 8 lakhs at the rate of 7.5% per annum.
Step 3: You can contact bank XYZ, fill in the application. After that you need to submit the required documents.
Step 4: Bank XYZ will instantly pay up the loan from Bank ABC upon approval and open your new account with them.
Step 5: In the next month, you will be repaying bank XYZ.
This is just how simple it is. In most cases, banks also give you the option to do it online through a mobile banking app or internet banking. Here, everything will be done online, including closing the account of your initial personal loan.
What are the Benefits of a Balance Transfer?
There are several benefits interlinked with the balance transfer option, and some of them
are:
a) You Can Get Lower Rates of Interest
Lower rates of interest on loans—who doesn’t want them, right? In case of a balance transfer for your personal loan, you might find financial institutions giving you 5% less interest rate than what you were paying—and that is a huge difference.
b) You Can Finish Paying Off the Loan Faster
Sometimes, most of us just want to get off personal loans as fast as possible. But small EMIs do not let that happen. In case of a balance transfer, you might even get the option to transfer your personal loan to a bank that allows you to customise your EMIs to a larger amount, which will speed up the repayment procedure. Isn’t this just great? Just imagine completing a loan that would have initially taken seven years in a period of 3 years. You will even lower the rate of interest you pay to the bank as a whole with the shorter tenure.
c) You Can Get a Bank More Suitable For Your Needs
The initial provider of your personal loan can lack in ways that the current one would not. You could even find better providers who offer you digital platforms, prepayment options, foreclosure with no charges and much more. This would again be another reason why everyone would choose a balance transfer of their personal loan.
These are just some of the many benefits that a balance transfer could offer. If you do find an option for a balance transfer that sounds beneficial, do not sit back and hesitate to get it done.
Conclusion
Sometimes, we get better options a little late down the line. It does not matter if it is a little late; you can always use that opportunity – just like a balance transfer. If you find a better option to pay off your personal loan, like finding a bank that offers you more benefits in terms of tenure, interest rate, EMIs and more, you can also transfer your personal loan to this bank through the personal loan balance transfer option. So, what is the wait for? If you have a personal loan which you want to transfer to a bank that offers better interest rates, do it right away!
Date: 15/06/2024
Photo Credit: Huma Arham
Read also:
- Loan Agreement Between India and International Bank for Reconstruction and Development (Odisha State Capability and Resilient Growth Program-12/07/2023)
- Court’s decision to strike down student debt relief plan is wrong- Joe Biden on Supreme Court Decision on Student Loan Debt Relief (30/06/2023)
- RBI Model Educational Loan Scheme-2001
- CICs hold 90% of their assets in equity, preference shares or convertibles bonds or loans.
