Transferring the personal loan: Understanding 5 factors

You can easily transfer your personal one from one bank to another, but there are important factors to consider before doing so.

Taking a personal loan has many advantages, for both business and personal purposes. The loan is disbursed fairly quickly and the monies can be used for a variety of needs. Traditionally, people have been averse to taking loans for purchases, but lately, it has become somewhat of a trend to borrow personal loans, vehicle loans, house purchase loans, etc. In the face of mounting expenses and rising inflation, one may not have the financial wherewithal to buy expensive items on an outright purchase basis.

Thus, taking a personal loan to buy an expensive electrical appliance, or to pay for your child’s higher education, or to fund an urgent medical operation, etc. is a viable alternative for most people. Also, it is quite easy to get a personal loan, if one approaches their bank and studies their terms and conditions before signing up. Normally, many customers have a pre-approved personal loan to their name, and the amount is disbursed within a few hours of applying for the loan.

It is important to note that personal loans are more expensive than home purchase loans, or loans against property in India. While home loans are at the lowest end of the borrowing spectrum in the country, personal loans are towards the higher side as regards interest rate. Thus, the decision to take a personal loan must be taken only after weighing the pros and cons of doing so[1] – it is an expensive loan to repay and it results in a large repayment amount overall.

Additionally, it is possible to effect a personal loan transfer from one bank to another, so that one may avail of a lower interest rate. However, it is important to understand 5 important factors associated with a personal loan transfer, such as[2]:

1 The loan transfer process: This is how it works – if you wish to transfer the loan from one bank to another, you must ask the second bank to issue the outstanding payment on your personal loan to the issuer bank. Once this money is paid, the personal loan balance transfer is done with the second bank, i.e. the balance unpaid amount is now to be paid to the second bank. All major banks in India facilitate the personal loan transfer quite easily, and some banks even allow it online.

2 The total repayment money: When transferring the loan from one bank to another, there are some sums of money to consider, such as how much total repayment you will make over the loan. Though you may transfer it from one bank to another at a reduced EMI and also a lower rate of interest, you are still repaying a larger amount of money than the actual borrowing if your tenure with the new bank is longer.

3 Processing charges:Every loan is an agreement between the borrower and the bank (or financial institution). As such, every agreement must be registered and its stamp duty paid for it to be legally viable. Just like the house purchase agreement is registered at the sub-registrar’s office and also at the bank which issues the loan, so also the personal loan agreement is registered and a stamp duty is payable on it. Apart from these charges, you may also have to pay the processing fee, loan valuation fee, technical/legal fees, etc. Calculate all of these charges against the lower interest rates that you pay after transferring the loan. If the charges outweigh the benefit of transfer, it is better to not transfer the loan at all.

4 Interest rate being offered: The major benefit of transferring the personal loan from one bank to another is the lower interest rate[3]. Find out how much lower the interest rate is before you make the jump from one bank to another. The best banks in India offer an appreciable benefit in this regard, so it is better to transfer to a bank with a lower interest rate and save money in the long run.

5 Other benefits being offered[4]: Apart from a lower interest rate, some banks also offer such other benefits as a free credit card or insurance. Check these other benefits to see if you really require them, or if they will cost you some money at a later date.

It is worthwhile to study the bank’s terms and conditions before finally signing up for the personal loan transfer. Some banks insist on the customer opening a savings bank account with them, and the monthly EMI is auto-debited from this account. Others ask the customer to buy insurance from a certain insurance partner for availing the loan transfer, or to deposit X amount of money towards a fixed deposit product from the bank. Only opt for the most trusted names in banking, which do not have any hidden conditions and which offer complete transparency when laying out their terms and conditions when you approach them for a personal loan balance transfer.

Keywords: personal loan transfer, personal loan balance transfer

[1]https://www.bankbazaar.com/home-loan-balance-transfer.html

[2]https://cashkumar.com/personal-loan-balance-transfer

[3]http://www.paisabazaar.com/personal-loan/articles/7530-personal-loan-balance-transfer-factors-to-consider/

[4]http://economictimes.indiatimes.com/small-biz/money/should-you-balance-transfer-your-home-loan-or-reset-it/articleshow/47688545.cms

Author: Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles by others on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to editor.webposts@gmail.com