Design Credits: Sheetal Patil
Lower interest rates and attractive discounts to be had when you transfer your loan from one bank to another? Highly tempting, we know, especially when you know that you can save on your EMIs every month. But is it really advisable to transfer your loan to another bank without considering all the factors?
Today, we’ll tell you the top 6 factors which you should consider before transferring your loan. These factors will help you take an informed decision. Let’s begin.
- Calculate the total cash outflow
When you transfer your loan you might be given the option to have lower EMI rates and a longer repayment period. But hold on. You should understand, that in reality, you will end up paying a higher amount because the interest is calculated on the outstanding loan amount. So, the longer you keep the loan amount outstanding, the more interest you will end up paying. Calculate the EMI amount which you are currently paying and the total cash outgo for both banks.
Here’s a handy calculator to help you figure it out: Loan EMI Calculator.
Unless you are hard-pressed for cash, do not consider transferring your loan by opting for a longer tenure. Try and calculate your monthly expenditures, and finish repaying your loan at the earliest!
- Collateral value
In case you have already paid off a large chunk of your loan, do not offer the original collateral to the new bank. Instead, you can take a separate loan, if required, with that collateral, in case there’s a genuine need. Do a proper evaluation of the original collateral and offer a lower collateral to your new bank. In case the new bank still insists on the original collateral, negotiate further to lessen the interest rate.
- Processing fees and other charges
In case you wish to transfer your existing loan to a new bank, consider the processing fees, legal charges, stamp duty charges, valuation fee, technical charges, and other charges which your new bank will charge for transferring your loan. Processing fees can vary from one bank to other. Some take it as a percentage of the total loan amount while others have a fixed amount. So do a thorough calculation of all the charges before transferring your existing loan to a new bank.
- Additional discounts
Banks will always promise you attractive discounts or offers like a free Credit Card or Personal Accident Insurance for transferring your loan to their bank. Before falling for these offers, check whether you actually need these additional benefits and if there are any hidden charges involved. Don’t be taken in by ‘free’ offers and discounts, as they may not actually be free!
- Read the terms and conditions
Before signing on the dotted line, carefully read the terms and conditions of the loan transfer. Cross-check the terms and conditions against those of your existing bank and understand the pros and cons of both. Make an informed decision after reading through both the documents. In case there’s any confusion regarding the terms and conditions, consult a financial advisor or the bank’s advisor to understand things better.
- Allied account requirements
When you take a loan from any bank, they generally require you to open a Savings Account, through which the EMI amount is deducted. You may already have an account with your current lending bank and it’s likely that the bank will offer you a lot of additional services because of your long association with them. You may be forsaking a lot of these soft benefits in the process of transferring your loan to a new bank.
Consider these factors before you opt for a loan transfer to make sure you get the best deal. Looking for a loan?