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Home Loan – Balance Transfer Considerations

There is a lot of difference between a Home Loan & Home Loan Balance Transfer. Both are availed in unique and different scenarios.

Home Loan is all about availing the funds to buy an asset (home) where the amount with some interest has to be repaid within a certain period of time. Age, credit worthiness, credit score plays a crucial role and require a long trail of documentation.

Whereas, Home Loan Balance Transfer is an option to opt for a different Bank/NBFC to get flexible terms & conditions, better services and other benefits. It helps to lower the EMI’s, increase the life of the loan or increase the amount that helps in increased savings of an individual.

There can be a time when your current loan becomes a burden on your tax pocket. To make it lighter, Balance transfer will prove to be a good choice. Almost all banks allows to change your Home Loan from the current lender to another.

Transferring an existing loan is a simple and easy process. The new Bank/NBFC would love to offer you with lots of perks and good discounts with promising interest rates as compared to your existing lender. There is not only about the interest but other factors too that has to be considered and one has to be aware of. This understanding will effect as an informed and wise decision.

Be calculative: though every Bank/NBFC tries to attract the customer with the low interest rates, reduced EMI’s, top up amount and longer tenure. It is important to be clear that such facilities might increase the amount that has to be paid to the lender because the interest keeps on adding on the outstanding amount. If the current EMI’s are higher, compare the total outflow with both the Banks and then take the decision.

Fee/ Costs: The stamp duty, processing fees, legal fees, valuation fee, technical charges and other levied charges that comes along with the transfer of the loan has to be considered. Compare it with the current lender and the benefits in terms of reduced EMI’s or interest rates. For some lenders the processing fees is just a percentage of the loan amount whereas for others the calculation depends on the profession of the consumer. The existing Bank/NBFC might add up the closure cost in case of Balance Transfer.

Credibility & Reputation: Ensure that the new lender has a good credibility & reputation in the market. The low interest rates offered by them actually exist & not a market gimmick.

Clause Issues: Read all the offered documents carefully before signing any document with the new lender and also ensure with any hidden charges included. There can be clauses like buying insurance from a specific company, depositing a certain amount as a fixed deposit, saving account opening for self or for the family. There might be conditions that you might have overlooked with an existing and the new lender while taking a leap. In short, policy clauses in the sanctioned letter has to be understood carefully.

Outstanding to Property Value Ratio: this situation arises when the customer have already paid a huge chunk of the loan. One can offer a new and a lesser amount collateral to the new lender. It wont be an intelligent decision to give a security which is double the amount of an outstanding loan amount. If the bank insists to keep the same collateral, one can negotiate for lessening interest rates further.

Customer Service: Take a reference check from the market about the services offered by the new lender before transferring the loan. You never know how will they treat you after, so its always better to be cautious.

Attached Attractive Offers: Its of no surprise when the customers are offered with a free credit card or may be some accident insurance. But instead falling for them, analyze if you really need them and ask for more related information.

Final Call: Bank/NBFC are into the business of lending. Just shifting for minor benefits can lead to major after effects. Its always better to look for the concerned issues before moving ahead for the final take.

It is obvious the the option for Balance Transfer is only taken when the borrower is benefited with overall saving as compared to the costs incurred. It is advisable to reduce the EMI’s (Interest rates) if he has regularly paid the EMI’s for few years. It also depends on the unpaid amount and the remaining term of the loan. If the loan life is short or the unpaid amount is low, Balance Transfer will not prove to be a good option. Balance Transfer do not require an applicant to involve a co-applicant. Eligibility criteria and factors that play a crucial role with regard to the same:

  • Age
  • Qualification
  • Experience
  • Probability of the continuation in the same job
  • Source of Income
  • Annual or Monthly Income
  • Credit History
  • Number of dependents

Once the borrower identify the lender, start working on the paperwork. This includes KYC’s, property documents (registration, stamp duty payments),  loan sanction letter and the present loan agreement. The new lender will ask for an income proof, current bank statement, and copies of last 3 yrs IT returns. This process is like applying for a fresh loan proposal.  Verification of credit score or property will also be done. (Need To Know which Factor Effect Your Loan EMI)


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