A Home Loan transfer, also called a balance transfer, is an option you can use when you wish to avail of a lower rate of interest on your Home Loan. Here, you can transfer your Home Loan from your current lender to someone with a more reasonable interest rate and better features.

An additional loan amount over and above your current outstanding Home Loan is known as a Top Up loan. You can opt for it when you go for a Home Loan Balance Transfer and get the benefit of lower interest rates on additional funds.

Why You Should Transfer Your Home Loan?

You can transfer your loan from your current financial provider if you think that the loan is proving to be too expensive. This will allow you to save on exorbitant interest payments and even lower your EMIs. While this might seem like an interesting offer, there are other points to consider.

A Home Loan Balance Transfer basically involves approaching another lender and negotiating a lower rate of interest with them to refinance your Home Loan. When this happens, you end up prepaying the loan with your current financier and taking a new loan with another bank.

You will benefit from lower interest rates or even lower EMIs, but these factors alone shouldn’t be your Home Loan transfer reasons.

As a borrower, you must be aware of every term and condition before you take on this financial responsibility.

Here are four points to consider before you transfer your Home Loan balance.

Do a Thorough Cost Benefit Analysis

Remember to analyse your current financial situation before you transfer your loan. Here are some guidelines to help you.

  • If you’re paying a fixed rate of interest to your current borrower, it’s not advisable to move as you will have to pay a heavy prepayment penalty and other Home Loan Balance Transfer charges.
  • If your loan has a lengthy tenure, transferring it to a lender who offers a shorter tenure might help you save money.
  • Be on the lookout for hidden costs in the process. For instance, taking a new loan needs a stamp duty to be prepared, a charge that is not included in the processing fee.

Collateral for Outstanding Balance

If you’ve already paid off a huge chunk of your loan, don’t offer the original collateral to the new bank. There’s no point in giving the bank a security that is worth more than the outstanding balance of your loan. You can offer lesser collateral to the new lender and if they insist on the complete assurance, make sure that they lower the rate of interest further.

Analyse the Charges and Benefits of Allied Accounts

Most banks require you to open a savings account when you avail of a loan with them to route the funds to that account. In this case, it is wise to find out the charges applicable and the facilities they will provide to you. For instance, Bajaj Finserv, offers Online Application Process, Instant Online Approval, Minimum Documentation, Additional Top up Loan at attractive rates, No Hidden Charges, Customised Insurance Schemes, and Online Account Access. They also offer facilities like NIL Part Pre-Payment charges, NIL Foreclosure charges, and 3 EMI Holiday.

Understand the Terms and Conditions

Before signing that all important contract, remember to read all of the terms and conditions attached to the loan of both banks. Some banks might include buying some sort of insurance from specific company or opening a number of saving accounts.

Don’t be deceived by a lower interest rate or any other marginal benefit. Take all the factors into consideration and weigh the pros and cons before you make the decision to opt for a balance transfer.

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