A personal loan is generally taken in a crucial financial shortage and of course, they help the best. A personal loan is very helpful in fulfilling urgent monetary needs.
What Is a Balance Transfer? In simple words balance transfer is nothing but taking a new loan from another lender with a less interest and prepay the previous costlier loan.
Advantages of Balance Transfer • Lower Interest Rates: A refinance mostly done to minimize the interest rate. You might have taken a personal loan with a higher interest because of income, credit score or anything else. But along with the passing time, your situations are certain to improve and the lenders may offer you a loan with a lower interest.
Change in EMI- As mentioned in the previous point that our income is dynamic. The financial condition when you were taking a loan and today's condition may have a great difference. You may afford to service a higher EMI or your commitments might have increased so the EMI is becoming a burden to you.
Better Services: Sometimes it may happen that you are unsatisfied with the services of your present lender. A refinancing can help you to get rid of the previous lender and go to a lender with better services.
Taking an Additional Loan: A balance transfer helps you in getting an additional loan over the personal loan, known as a top-up loan. A top-up loan is always better than opening a new credit account for some extra cash.
Points To Ponder Before A Balance Transfer • Processing Fee and Other Charges: Every loan comes with an origination fee which is also known as processing fee. Rather than processing fee, there are some other fees and charges which you must know before switching to the next lender.
Calculate the Total Deal: It is very important to calculate total amount that you are going to pay the new lender at the end of the tenure. You need to decide which the best deal is for you.
Other Terms and Conditions: Every lender has their own set of terms and conditions. Before a refinance you must go through the fine print of the new lender very carefully.
Multiple Balance Transfer- As mentioned earlier that one must go for a balance transfer at least once during the loan tenure. It even enhances your credit score as it proves your financial awareness. But multiple refinancing may affect adversely on your credit score.
Eligibility for Balance Transfer The first and foremost eligibility for a balance transfer is that you must be out of the lock-in period which is 12 months for a personal loan. Secondly, you must have a good credit score.
The Documents Required for Balance Transfer Mandatory Document • PAN card • Passport size photograph • Last 2 months salary slip • Last 6 months bank account statement
ID Proof and Address Proof • ADHAAR card • Voter's ID card • Passport • Driving License
Address Proof • Landline or electricity bill • Registered rental deed
The Steps for Balance Transfer • Have a market research on as many as lenders and check for balance transfer schemes available with them. • You will need to provide details of your existing personal loan, principal amount left, tenure completed, rate of interest, etc.
In the next step you will need to submit the documents which are mentioned above. • Your loan will be sanctioned if the lender finds you creditworthy. Such credit is generally disbursed within a short time.
To conclude we can say that a balance transfer is a great tool to consolidate costlier debts. A balance transfer is a quite simple process with huge benefits. Combining multiple loans to a single loan with a balance transfer makes you save not at once, but every month you will be able to save some amount.