A home loan can be a long-term commitment, and sometimes a floating interest rate can increase your EMIs to an extent when you’re forced to look for the quickest exit. In your hurry to reduce your repayment burden, you may accidently choose to proceed with a home loan balance transfer with a new lender without the necessary due diligence. Since home loan interest rates are at an all-time low with demonetisation and other government measures such as the RERA coming into play, you may be tempted to opt for a quick refinance to take advantage of low interest rates. While a balance transfer or home loan refinance may make your home loan more affordable, not getting it right may end up costing you more.

Consequences of An Unplanned or Hasty Balance Transfer

  1. In certain cases, the new lender’s interest rates might be low only for a certain time period and after that they could increase phenomenally.
  2. The terms and conditions of the new lender could be binding and restrictive. For example, the new lender may have terms that involve you paying a huge fine in case of foreclosure or pay high fees for prepayment.
  3. If you make a switch during the second half of your tenor, you could end up saving much less than you would have if you had switched in the beginning of your tenor.
  4. You may end up with a lender who doesn’t offer convenience in terms of online account management and customer service.
  5. If you hastily shift to a new lender, your old lender may not release your contract easily and create unnecessary issues.

Tips for Performing a Successful Transfer

  1. Before considering a home loan balance transfer, have a conversation with your existing lender and request for lower interest rates. Certain lenders may oblige in order to retain you as their customer.
  2. Perform a thorough study of interest rates offered by various lenders and choose the one with the lowest interest rates.
  3. Apart from paying attention to interest, read the terms and conditions of your new lender carefully and ensure that the terms are not binding or contradictory to your interests in any way.
  4. Compare and analyse customer service of various lenders, take into account reviews of other borrowers, and then choose a lender with good service.
  5. Ensure that the new lender has the provision for prepayment with no strings attached. Certain lenders charge phenomenal fees for prepayment of loan. Hence, when transferring, ensure that no such clauses exist. Prepayment of the loan helps you save money that you would have wasted on additional EMIs.
  6. Remember that transferring a home loan is a long and challenging process, so plan ahead. Be prepared to re-submit documents like address proof, identity proof, etc. and get these ready in advance.
  7. Find out about all the fees and charges associated with the transfer and move forward only if it is truly feasible for you.
  8. Before performing a home loan balance transfer make sure to get an approval from your existing lender.
  9. Ensure that you get all your original documents and paperwork from your existing lender.
  10. Make sure to perform a home loan balance transfer as early in the tenor period as possible. This could save you a lot of money.

Pros of Home Loan Balance Transfer

Although it takes careful research and planning, performing a home loan balance transfer or refinancing your home loan is actually very beneficial for you:

  • New lenders may offer you affordable interest rates and thus, save you a lot on monthly repayment.
  • If performed early in the tenor, a home loan transfer can ensure that you save your hard-earned money.
  • You may be able to benefit from new terms that were absent in your earlier agreement.
  • You may be able to get an additional top up loan during your home loan transfer and benefit from lower interest and large loan amounts.
  • You may be able to increase your repayment tenor and reduce your monthly EMIs in case you are falling short of funds.

Choose to perform a Home Loan Balance Transfer with Bajaj Finserv, which not only offers low interest, but also the availability of a top up loan as well as other benefits like a 3 EMI holiday.

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