It is true that money is sweeter than honey. We can avoid or cancel a romantic date but can we miss a chance to lowering the expenditure if we get a chance? Of course the answer is no. Being a rational human being you always opt for low price benefits just like a rational borrower who keeps searching the ways to lowering the cost of loans and advances he is availing. One of the many ways of lowering the cost of loan is to transfer the balance. This is easy and surely beneficial for your credit history as well as credit score.
Personal Loan Balance Transfer
Transfer of personal loan is an easy concept. Basically in this case you get a personal loan from a bank on a specific interest rate. After repaying back few EMIs you just transfer the rest unpaid loan amount to another bank of your choice that offers you lower interest rate.
Transferring the loan balance does not bring any complication in case of repayment or anything else. The instalments will be at its place. The thing that will be different is the amount of money to be paid. Now that you are availing a personal loan that offers you lower interest rates your installments can be changed. It depends on the banks rules of tenure and payment system of the loan.
Is Personal Loan Balance Transfer Beneficial?
This is very important point here. Basically the question whether availing a personal loan is beneficial or not is itself subjective. Loan is not a snack that you can buy anytime you are starved. It is more of a staple food that you will take only if you need it. Now if you are availing a personal loan then definitely it brings you some kind of benefits.
The first thing you get in transfer of loan is lowering the interest rate and that leads to longer tenure period. Now it can be bad for some and good for some. On a general basis it is somewhere good for the borrowers. When you get a lower rate of interest it is not that tough to expand your tenure period for a long time.
On the other if you are paying your EMIs for longer time it automatically enhances your credit score. But remember the EMIs should be paid regularly. In fact it will be easier for the borrower now to pay EMI regularly as the rate is much lower than before.
Reducing Interest Rates – How?
As has been said throughout the article that you can transfer your loan to some other bank to avail lower rate of interest but it is not as easy as you think it is. Basically it does not matter what the borrower is willing to do here. All the borrowers want to decline the rate of interest hence the portion of EMI. But if they wish they cannot just switch to lower interest rate. It depends on the other bank whether it will offer you low interest or not.
Transfer Your Personal Loan to Switch to a Lower Interest Rate
You are availing a personal loan from XYZ Bank. You are paying the EMIs on regular basis. Hence you are successfully enhancing the credit score. Now this will trigger the other banks that also want committed customers like you. In that case they will offer you lower interest rate than what you are paying now. You can always in this case switch to other banks to save a bit of money every month.
Things to Remember Before Transfer Your Personal Loan
- Processing Fees
You have already paid a processing fee when you have taken the loan at the first place. Again when switch, you need to pay another processing fee to the new bank as well. Calculate the fees whether it will be beneficial to switch or not before switching.
- Collateral and Security Value
Mostly the borrowers provide previous collateral as security in their new bank as well. It is common but here there is a flick. If you have already paid off the large portion of your loan then providing a security which costs more than the unpaid portion will not be a wise decision.
- Total Cash Outflow
You are attracted to the lower interest rate but did you think that at the same time your tenure period is also getting longer. So it is necessary to calculate how much money you are paying out to the lender. The total cash outflow must not be more than what you are required to pay.
- Read the Terms & Conditions Carefully Before You Sign the Loan Papers
Mae sure to read and understand the loan conditions and terms carefully before you jump into the loan agreement, especially the hidden cost should be pointed out beforehand.