If you are not happy with your current debt-load and want to do some smart financial planning to become debt-free, we recommend you to consider debt consolidation and balance transfer. With well-established banks/NBFCs and new Fintech lenders popping up in every corner, customers have a better chance of getting personal loans than ever before. But now the focus is shifting to better loans with better rates based on credit-risk when it comes to the product and creditworthiness when it comes to the customer.
To the casual observer, getting a balance transfer loan is a simple act of handing over loan from one financier (who levies more interest) to the other (preferably with lower rates and other possible benefits). It is in fact another name for loan refinancing. Do not think that this step alone will get rid of your debt, but it could be a good first step as you will be paying lesser EMIs. However, it is not as simple as it seems because anything that fiddles in big money would be anything but.
Things to know before transferring your personal loan:
Banks/NBFCs are forever struggling to expand their business and clientele by coming up with competitively priced financial solutions. But you need to know what you are signing up for too.
Here are a few tips worth remembering:
- Customers are always on the lookout for even the slightest respite from the whopping EMIs and dues they shell out every month. Though lesser interest rate is not the only thing they seek; sometimes they may want to extend the tenure to bring down the EMI, often at a higher rate. So, if you are looking to make the load less burdensome, this could be an option.
- You must always ensure that you transfer the balance at the right time. For instance, if you choose to refinance in the middle of the current tenure, you might be levied a penalty fee and almost every bank does this. But if you refinance way too early (like even before 6 months after getting the loan), it is not regarded favorably.
- Take a good look at the interest rate trends and related policies adopted by the lender in the past one year before you switch. What we mean to say is, you shouldn’t climb out of a pond to fall into a sea. Don’t forget to compare the fees and processing charges too.
Summing it up:
Approval for balance loan transfer from a new lender is totally dependent on your credit behavior and repayment history. So do take care to achieve and maintain a good CIBIL Score.
To know more about loan refinancing and balance transfer, click here.