The Reserve Bank of India slashed the repo rate by 75 basis points in March-end, 2020. It further impelled the financial institutions to revise and reduce their lending rate accordingly.
It is, thus, a great opportunity for existing borrowers to switch their lenders and avail of reduced interest rates alongside other favorable terms than what their current lender is offering. Such a facility is extended to almost all secured and unsecured advances, including personal loans.
While a personal loan balance transfer seems a borrower-friendly option, individuals looking to avail of it should know all its terms and conditions to avoid financial pitfalls in the future.
Things to consider while opting for a personal loan balance transfer
While a personal loan is an excellent option to avail quick financing for a number of purposes, its interest rates can be relatively high. The reason for it can be primarily attributed to its collateral-free nature, which allows borrowers to access substantial funds without risking their assets.
Borrowers looking to reduce the burden of their loan repayment can opt for a personal loan balance transfer. Nonetheless, before doing so, they also need to weigh the benefits properly considering the terms and conditions it accompanies.
Right time for a balance transfer
A balance transfer loan proves to be beneficial only if opted for when the time is right. Several financial experts suggest choosing this facility during the initial stages of the loan repayment period. This is because, during that time, the EMI comprises mostly of the interest component of repayment. Therefore, if a borrower plans to opt for this facility, he/she should do that preferably within the first two years of the repayment tenure.
It constitutes the most significant part of a personal loan balance transfer. Most borrowers opt for this facility primarily to avail of lower interest rates than what their existing lender is offering. Such a facility applies to both floating interest rates as well as fixed interest rates.
This interest rate varies from lender to lender. Moreover, the borrowers should also look for ways to improve their CIBIL score for a personal loan balance transfer to enjoy competitive interest rates and other additional benefits without the hassle.
Charges of the personal loan transfer
Most lending institutions in India offer a personal loan balance transfer facility against substantial charges. Thus, before opting for it, you should review whether it is worth it or not.
Selected NBFCs like Bajaj Finserv offer this facility without hidden charges. They also extend this facility with Flexi benefits. There is no limitation on the number of times you can withdraw or part-prepay from the loan limit. Furthermore, with the feature to pay interest-only EMIs for the initial part of the tenure, you can lower your EMIs by up to 45%*. They also offer an extended repayment tenure of up to 84 months.
Choosing the right lender
Finally, since the charges and interest rates are determined by lenders, it will be wiser to conduct thorough research before settling for one. For instance, if any lender offers an uncannily lower interest rate, borrowers need to ensure they will get all the advantages that they are promised. It will thus help them to make an informed decision without mistake. Individuals can also call their lender’s personal loan customer care number to learn about the terms of services in detail.
Though personal loan balance transfer allows you to enjoy a gamut of benefits, you need to adopt a systematic approach of how to plan your personal loan EMI repayment better. It will guide you to manage your financial liabilities more efficiently.