Loan Balance Transfer: How It Works And When You Should Opt For It?

Business & Finance

According to Money Control, loan balance transfers increased by 20% in 2019 from the previous year. The primary reason behind the rise in refinancing was because more people were unable to make their repayments on time owing to higher EMIs. On that occasion many borrowers opted for loan balance transfer or refinancing. In refinancing, the borrower can transfer his existing loan from the current lender to a different lender who offers a lower rate of interest. As it effectively reduces the EMI amount, it was a viable option which could counter repayment delinquency.

What is a Loan Balance Transfer?

A loan against property balance transfer can be described as the process of transferring an outstanding loan amount from an existing lender to a different lender who offers a lower rate of interest. 

How does Transfer Work?

A balance transfer works in the following steps – 

Step 1: Existing financial institution provides a No Objection Certificate (NOC). It also provides a statement that contains the outstanding loan amount.

Step 2: The borrower furnishes these documentations to a new financial institution that offers a lower rate of interest.

Step 3: Upon approval of a loan, the new NBFC in question repays the outstanding amount to the previous lender. It is followed by the payment of the EMIs by the borrower.

When to opt for a Loan Balance Transfer?

Even though balance transfer may sound like a beneficial prospect, borrowers need to decide upon the time of the transfer wisely by taking into account the following aspects –

  • Cost of loan

Lending institutions levy a few charges typical of new loans which are loan processing fee, legal fees, valuation fees, stamp duty charges, and other related fees as per new lending institution’s policies. These charges pile up on the total cost of a loan and hence call for the requirement to go for loan balance transfer. This is especially beneficial in the case of mortgage loans that involve a considerable funding and hence any increase in the cost of loan adds on to a borrower’s financial burden during repayment process. 

  • Time of refinancing

In the initial years of availing a loan, the interest component is much higher than the principal component in EMIs as per the amortisation process. Therefore, if a loan transfer is done after a considerable period when interest is less than the principal share, the borrower will be benefited.

However, while opting for a balance transfer, borrowers need to be specific about the new lender they are approaching. Considering that secured advances like a loan against property involve a substantial loan amount, it is ideally imperative to take into account multiple aspects of a lender before settling upon one. Apart from, rate of interest, one should also consider the tenor involved, loan amount offered, etc. Under such circumstances approaching reputed lenders like Bajaj Finserv and availing their loan against property balance transfer is the best option. 

However, there are a few things you need to know before applying for a loan against property that includes the required eligibility criteria and documents. It also comes with multiple lucrative features, such as –

  • Easy approval: Some financial institutions like Bajaj Finserv provide easy approval on loan. Upon production of necessary documents, they can provide approval within 72 hours. 
  • Low rate of interest: Interest rates in a loan against property are comparatively lower than most types of loans. It can help compensate for the other costs of a loan. 
  • Higher principal amount: Principal amount offered in a loan against property is higher. Some of the reputed financial institutions provide a principal amount of up to Rs. 3.5 Crore. It can be used to repay the existing loan and also leave room for other purchases a borrower wants to make. 

Considering the multiple lucrative features that the loans bring, it is essential that one avails such loans and uses it to finance their diverse expenses. The list of benefits also includes pre-approved offers for the existing borrowers by this reputed NBFC. These offers are available on numerous financial products that include home loans, business loans, personal loans, etc. You can take a look at your pre-approved offer by providing a couple of essential details like your name and contact number.

Despite such a host of benefits available on the advances, availing credit is a crucial financial decision and hence an individual needs to check out the details of a loan against property before availing one.

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