Personal loan balance transfer refers to the procedure of transferring your outstanding loan amount from your existing personal loan account to another account with another bank lender. A personal loan balance transfer facility is fundamentally availed for a better offering, which involves a lower rate of interest with favourable features. The scheme is highly beneficial for those who either are paying the higher amount as personal loan EMI or for the ones who have a short repayment period. However, before availing of it, you must carefully evaluate your balance transfer offer and the overall cost involved.
Why must you opt for a personal loan balance transfer facility?
A personal loan balance transfer facility ensures applicants are not victims of a hefty EMI as it permits borrowers to simply transfer their prevailing loan to another bank lender at a lower rate of interest. However, a borrower is even free to select a personal loan transfer if he or she is dissatisfied with the ongoing lender’s services. But before you go for it, you must assess the overall cost involved in transferring the loan, the savings that you will make and the other crucial terms and conditions.
For instance, suppose you are serving Axis personal loan, and you come across the terms and conditions of HDFC personal loan online and are attracted by the interest rate. Upon approaching the HDFC bank, you understand you can save a lot if you opt for the HDFC balance transfer option and thus go for it.
Just a caution, before you avail HDFC personal loan, ensure that the HDFC personal loan payment that you make, including the processing fee, is justifiably lower than your existing Axis personal loan. If it is, then only you must opt for it. If not, then stick with Axis personal loan.
Lower rate of interest – Significant advantage you get on availing personal loan transfer option is – you can simply shift your personal loan to a lower rate of interest. A lower rate of interest means a lower loan EMI and higher savings so that you can concentrate on your other important financial goals.
You can change your repayment tenure – Personal loan transfer endows you with the benefit of changing your repayment tenure. A higher repayment tenure means lesser loan EMIs, and a lower repayment tenure means higher loan EMIs, but this ends your loan quicker and saves a lot on the interest cost. So, when you opt for the personal loan balance transfer facility, you can select a repayment tenure as per your need.
Access to top-up loan option – When you choose the personal loan balance transfer option, you also get the accessibility to a top-up option. Let’s understand this with an instance. Suppose you transfer your outstanding personal loan amount of Rs 4 lakh to another lender, but in the case, you require around Rs 2 lakh more to mitigate your needs, then you may meet this simply with a new lender. Here, in this case, your overall loan proceeds will become around Rs 6 lakh, and you may be levied an EMI accordingly.
Can get better loan terms and conditions – While opting for the personal loan balance transfer facility, you must always select a lender offering the same loan at better conditions. May it be better terms linked with repayment tenure, processing fee or pre-closure.
Personal loan transfer eligibility criteria –
The borrower must have met the lock-in period of the existing loan, which is a minimum of twelve months with most lenders.
A clean EMI repayment record for an ongoing loan.
CIBIL score, as required by the bank, generally is 750 and above.
How to place the application for a personal loan balance transfer facility?
To place the application for a personal loan balance transfer facility, the applicant must avail of the foreclosure and NOC letter from the prevailing lender.
∙ Apply for a personal loan with a new lender who is providing a balance transfer option.
∙ Get approval for a new loan and avail of the sanction letter
∙ Take loan disbursement from a new lender through demand draft or cheque in favour of the existing lender and deposit the same to the existing lender.
∙ Post providing the demand draft or cheque from the existing lender, check that they cancelled all cheques and ECS and closed your personal loan account.
Before you place the application for a personal loan balance transfer facility, you must do your own research to know the difference in the rate of interest of existing and new lenders, additional charges in the case of new loans and overall savings which you may make.
Personal loan balance transfer facility rate of interest
The interest rate provided by new lenders on exercising personal loan transfer will generally be lower than personal loan rates incurred by the existing lender. The rate of interest offered will also depend upon your existing outstanding loan proceed, credit score, repayment tenure and other credit profile aspects.
Comparison of personal loan transfer options offered by different lenders –
| Bank or NBFC | Rate of interest (p.a.) |
| HDFC | 11 per cent p.a. |
| State Bank of India | 10 – 13.75 per cent p.a. |
| ICICI Bank | 10.50 per cent p.a. |
| IndusInd Bank | 10.49 per cent onwards |
| Kotak Mahindra Bank | 10.99 per cent onwards |
| Axis Bank | 10.25 per cent onwards |
| Tata Capital | 10.99 per cent onwards |
| Bajaj Finserv | 13.00 per cent onwards |
| IDFC FIRST Bank | 10.49 per cent – 25 per cent |
Balance transfer processing charges and fees –
Your existing bank lender might levy a foreclosure fee of as high as 5 per cent on an outstanding loan and proceed with transferring the loan to another lender if the original loan was taken up on a fixed rate of interest. Lenders will not levy any foreclosure fees in the case the personal loan is disbursed on a floating rate of interest. The new lender will levy a processing charge of up to 4 per cent of outstanding loan proceed during personal loan transfer.
