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December 12, 2017
A Personal Loan is a popular choice for obtaining financial assistance. However, it’s important to note that maintaining a good track record and a sufficient Credit Score is crucial when Applying for a Balance Transfer of your Current Personal Loan.
Prominent banks, such as HDFC Bank, offer numerous advantages to customers when they Balance Transfer a Personal Loan to HDFC Bank. These include:
With a balance transfer of your loan to an alternate lender, you can get a lower interest rate and an extended tenure with a lower EMI, which provides significant relief and makes your expenses more manageable.
If the interest rate for a Personal Loan is higher than the current industry offering, the interest rate offered with a Balance Transfer to HDFC Bank is 10.85%.
Additional Funds Offered as a Top-Up with a Balance Transfer: If additional funds are required, an applicant can apply for a Personal loan Top-up with a Balance Transfer. HDFC Bank’s Personal Loan Top-up with a Balance transfer is offered at a minimal rate of 10.85%.
Increase Eligibility for an Additional Loan Amount: A Balance transfer allows an applicant to apply for additional funds as a top-up or a mortgage, as the principal amount of the existing loan is deducted, creating additional eligibility.
Although a Personal Loan Balance Transfer is beneficial, comparing the costs and savings will help you decide whether going ahead will help you reduce costs. Below is an example to enlighten our customers about the facts and the financial implications.
Cost Details with an Example of a Personal Loan Balance Transfer:
For instance, if you’re currently paying an EMI of ₹ 16607/—@ 12% for a loan amount of ₹500000/—, with a tenure of 36 months, and find it challenging to manage your monthly expenses, a Personal Loan Balance transfer could be a welcome relief. This service allows you to reduce your monthly EMI, making it more manageable and easing your financial stress.
Assuming you have paid 15 instalments of your existing loan. If you Apply for a Personal Loan Balance Transfer to ICICI Bank,
With the successful Balance Transfer of your loan, you can get a suitable EMI, but what are the financial implications of the transaction? Are you going to save money, or will the loan costs escalate? Check out the example below to understand the facts.
If the Personal Loan was Repaid without a Balance Transfer, the Total Cost Affected will be as follows:
If the applicant were to repay the loan over 36 months, the total cost of the loan would be 597852+5000/—= 602852.
The cost of a Personal loan of ₹ 500000/- with the Balance transfer is as follows:
The loan cost with a Balance transfer is 652003/-;
The total cost of the loan will increase due to the basic charges and the extended tenure. Is it advisable to take a Personal Loan Balance Transfer? The answer lies in the loan status and the applicant’s requirements.
When is the Best Time to Seek a Personal Loan Balance Transfer?
The Balance Transfer programme is advantageous in specific circumstances. It will help save costs and help an applicant maintain a good CIBIL record.
At the Start of a Loan Tenure: A Personal Loan Balance Transfer affected at the beginning of a Personal Loan Tenure works best cost-wise. Once the minimum number of EMI is paid and the parent bank allows the transfer, the minimum interest has been paid, and the applicant can get a lower interest rate for the balance loan amount.
There is a Possibility of Default: If there is a shortage of funds and the applicant cannot pay the EMI on time, Applying for a Balance Transfer in advance works well. The return or instalment bounce will always be reflected in the credit history, and if not paid within 30 days, it will bring down the Credit Score. Therefore, planning your finances and keeping up your commitments is advisable. A balance transfer will help reduce the current debt and boost finances.
To Apply for a Home Loan: If your home loan request is not approved, the current credit you take exhausts your financial eligibility, and the bank declares you as being overleveraged. Before Applying for a Home Loan, consider Applying for a Balance Transfer to consolidate your current Personal Loan and Credit Card dues. Use our EMI Calculator to work out a suitable EMI. With a Balance Transfer, the monthly outgoings are reduced, which makes room for payment of the Home Loan EMI.
Transfer of Credit Card Dues: Overdue payments of a Credit Card attract an exorbitant interest rate of 36% per annum. If you feel burdened by your current expenses, Apply for a Balance Transfer of your Credit Card dues to a Personal for a convenient repayment option.
With a Balance Transfer of a Personal Loan, an applicant can re-invent a Personal Loan according to the best terms and conditions prevailing. In some situations, the total costs of a Balance Transfer may exceed the current Personal Loan. Alternatively, applicants can get surplus funds at a lower rate with a Personal Loan Top-up and a Balance Transfer. It is an excellent decision to Apply for a Balance Transfer rather than default on your credit repayments.
We have attempted to provide a holistic view of the financial aspects of a Personal Loan Balance Transfer, including the pros and cons, to help our customers decide.
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