Want to ease the EMI burden on your high-interest Personal Loan? Worry not! A balance transfer is the solution!
Having a tough time managing your finances? Are those Personal Loan instalments causing trouble? Well, you sure can explore other options. Like a balance transfer, for instance.
With a Personal Loan balance transfer, you’ll have a fresh chance to switch to a lower interest rate on your existing Personal Loan and ease your EMI burden. Intrigued? A balance transfer loan is a great option for those struggling to pay off their loan EMIs. Read on to know everything about it.
Additional Reading: Should You Be Choosing A Home Loan Balance Transfer?
What Is A Balance Transfer?
A Personal Loan balance transfer works exactly like a Credit Card balance transfer. You can avail a lower rate of interest, and sometimes, depending on your credit history, even a higher loan amount by transferring your loan balance to another lender.
A Personal Loan balance transfer allows you to move your debts such as credit card balances and existing loans to a Personal Loan with a lower interest rate. It could mean transferring it to another bank or switching to another loan offered by the same bank. It all depends on the availability, rules of the banks involved, and, of course, your credit profile.
Additional Reading: Personal Loan Balance Transfer
Is It A Good Idea?
Given that a balance transfer lets you enjoy better rates of interest and lowers your financial burden, it sure sounds like a great plan, doesn’t it? However, before opting for a particular offer, you must explore the balance transfer offers that other banks have to offer.
Additional Reading: Everything You Need To Know About Personal Loan Refinancing
When Should You Opt For A Balance Transfer?
If you need to decide whether or not it’s a good idea to opt for a balance transfer, these pointers will help you decide.
A Lower Rate Of Interest
The biggest reason to opt for a balance transfer is to get a better rate of interest. It’s possible that owing to your salary and credit record at the time of borrowing, you may have acquired a loan at a higher interest rate earlier. If your salary has increased and your credit history has gone from poor to excellent, chances are that you may be eligible for a Personal Loan balance transfer with a lower rate of interest, and in some cases, even a higher loan amount than your existing loan.
In Dire Need Of Cash
Have your finances gone a bit haywire leaving you strapped for cash? Can’t think of ways to get things back on track? Worry not! A balance transfer can come to your rescue!
While opting for a Personal Loan balance transfer, you can request your new lender to increase the loan amount. This additional loan can come in handy in case of a financial emergency.
Now remember, unless you know everything about the offer, opting for a Personal Loan balance transfer could be a little risky. However, that doesn’t mean that you shouldn’t consider it. You just need to be a little careful about the various factors involved in the process.
Additional Reading: How Balance Transfer Affects Your Credit Score
Here are the important questions you need to ask:
Is It A Good Deal?
Before signing up for the balance transfer, it’s better to evaluate whether you’re going to pay more for the new loan. If after a cost-benefit analysis you see that you’ll end up paying more even after the balance transfer (on account of fees and charges involved), then there’s no point opting for the balance transfer.
While evaluating the offer, you also need to decide the loan tenure. Although it totally depends on your financial situation, you must try and pay higher EMIs over a shorter period. In case that isn’t feasible for you, opt for a longer period with lower EMIs.
Additional Reading: EMI Payments Explained
Have I Read Everything Carefully?
We all tend to be super lazy when it comes to reading the fine print. But, if you ignore the minute details on your loan documents, you might miss out on some important details.
Therefore, it’s advisable to read all loan-related documents carefully before agreeing to the terms and conditions. It shouldn’t take more than 15 minutes of your time, but it could save you a lot of hassle in the long run.
Additional Reading: Do Read The Fine Print On Your Loan Documents
Are There Any Strings Attached?
By strings, we mean processing fees and other charges associated with the loan. No matter what, you must have a crystal-clear idea of all these charges right from the start.
As it’s a loan balance transfer, you will most probably be asked to pay a pre-closure penalty to the old lender. However, these conditions might vary from one lender to another.
You might be asked to pay a fee in the range of 1-3% of the principal amount being transferred. Depending on your loan amount, these charges could be quite substantial, which is why it is important to have complete clarity on any fees involved.
Additional Reading: What Are The Charges And Fees On Personal Loans?
Different lenders or financial institutions might try to lure you with balance transfer offers. While it isn’t bad to consider or even accept one of these, you just need to be sure of what you want and what will suit you the best.
Most importantly, you need to decide if you absolutely need to opt for a balance transfer or not. Lower rates of interest might lure you into opting for a balance transfer, but don’t forget that there may be other charges involved. Only opt for the balance transfer after taking these charges into consideration.
While a balance transfer may significantly reduce your loan EMI burden, missing payment deadlines and not having a solid debt-repayment plan will defeat the purpose of a balance transfer. This will eventually bring down your Credit Score! So, besides enjoying the perks of a balance transfer, it’s necessary that you pay your dues on time and in full!
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