A loan balance transfer is a process of switching the unpaid principal credit amount from one lender to another for better terms. Financial institutions around the world offer this facility, and borrowers can avail it to relish the benefits of better rates and other terms of lending.
The process of a home loan balance transfer is simple and takes minimum time with some of the best lenders. After the application, once the new lender approves it, they will pay the outstanding to the current lender. Upon receiving the entire amount, the existing lender releases the property documents and a NOC, which the borrower needs to submit to the new lender for creating a new mortgage and repaying loan outstanding thereby at reduced EMIs.
Top 5 benefits of home loan transfer
Home loan balance transfer has become a common practice among borrowers. Especially in recent years, more borrowers are opting for this process to avail better loan terms. Here are the top few benefits of this facility that one must know before applying for it –
- Low rates of interest
The primary reason to opt for a home loan transfer is to avail a comparatively low rate of interest. Since home loans are long-term advances and involve a considerable amount, a better interest rate can always make a significant difference.
Therefore, if a new lender is offering a lower interest rate with a difference of more than 20 to 25 basis points (100 basis points = 1%) compared to the current one, then borrowers should go ahead with this process.
- Reduced EMIs
Lower interest rates on home loans result in reduced EMIs. Such reduction thus allows borrowers to save a substantial amount every month. Individuals can use calculators available online to estimate their EMIs when switching to a new lender to gauge their savings. It will aid them in making an informed decision.
- Flexibility in repayment tenure
Availing this loan transfer facility allows borrowers to negotiate for the repayment tenure of their home loan. Since a new lender is involved here, they can either increase or decrease the tenure of their credit as per the borrower’s credit profile. With reduced EMIs and a properly assessed loan, the tenure can make home loan repayments more affordable than earlier.
- Better loan terms
There are several features, terms, and conditions associated with every home loan which vary from one lender to another. For instance, the part-prepayment facility allows borrowers to repay a lump sum of the principal loan amount. It reduces their overall credit amount, and subsequently, the EMIs. However, some lenders charge a fee for it, whereas some of them do not. Apart from this, foreclosure and some other charges are associated with the loan too, which can be saved based on your choice of lender.
A reason to opt for a home loan balance transfer is to select a lender who charges low to no amount for part-prepayment, foreclosure, etc. It helps borrowers to keep the cost of borrowing low and appreciate the benefits of better loan terms.
- Top-up loan
Top-up loan is an additional amount that lenders offer to individuals opting for a balance transfer facility with them. It is an additional credit facility and comes with the same repayment tenure and interest as the existing one. It typically has no end-use restrictions and can be put to diverse usage. Top up loans on home loans are one of the pertinent reasons behind individuals switching their home loans to new lenders.
Further, some lenders also provide pre-approved offers on home loans. These offers streamline the loan application process, making it hassle-free. The offers apply to several financial products along with home loans, such as loans against property. Individuals can check their pre-approved offer within seconds by providing their essential contact details.
A home loans balance transfer facility reduces the interest rate, offers better terms, and makes loan repayment more manageable. It leaves borrowers in a better financial position to complete the repayment of their credit while ensuring it helps improve their credit score. Even though home loan balance transfer may work in favour of the borrowers, yet an in-depth cost benefit analysis is vital to ensure that once does not pay more as a result of availing this facility.