Understand loan transfer!
nice article, helps lot to understand about loans transfers
The process by which the unpaid principal amount of the loan is transferred to a different lending bank for a lower rate of interest is called balance or loan transfer.
A loan balance transfer primarily depends on the following factors:
The difference in the interest rates.
The loan amount that is yet to be paid.
How many years remain in the loan tenure.
In case the unpaid amount of the loan is low or if the remaining loan term is not too long, then a balance transfer may not be the best choice. Remember to also check if your lending bank charges a processing fee for balance transfer of your loan.
A balance transfer will be most beneficial if you are in the early phase of your loan, rather than later in the loan tenure.
Remember that for a loan balance transfer you need go through all the procedures involved in a loan, once again. These include a credit appraisal, legal verification of property documents and technical evaluation with the new bank. The loan will be approved only when the bank is satisfied with the verifications. This also includes paying a processing fee from anywhere between 0.5%-1% of the loan amount. You could ask your new lender to waive this off.
Some banks charge a prepayment penalty for a balance transfer. This can vary anywhere between 2%-5% of the principal outstanding amount of the loan and depends on your lender. However, recently many institutions and some banks seem to be waiving this off for their customers.
The lender that you are shifting to usually offers you a loan based on the current loan rates that their customers enjoy. You can, of course, negotiate and check if they will give you lower rates.
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