May 13, 2018

What is Balance Transfer of Loan?

Balance Transfer of Loan
Stay Alert - Series 17

What is Balance Transfer of Loan? 

Balance Transfer of loan refers to switching of a loan from one bank to another to avail lower rate of interest. These days, many banks are providing lower interest rates for due to competition and gaining more business. This facility helps the customers for two reasons: interest benefits and obtaining additional loan amount.
When your bank have increased rate of interest on existing loan, then you can move to another for better rate of interest. You must close the existing loan account and open another in your new bank. Though it sounds exciting, you must follow the methods of balance transfer of loan properly. Just don’t look only at the interest rates. Please go through the terms and conditions of your new bank attentively.

Always reconsider your repayment capacity you borrow more:

If your new bank is trying to attract you with lower rate of interest and higher amount, then be careful. Are you able to repay it or not? Study your financials carefully and then, take a suitable decision.

Calculate processing fees and other charges:

Your new bank may have different charges such as processing fees, stamp duty, valuation fees, legal fees,  Mortgage fees and other relevant charges. Take an estimate of these charges and compare it with the benefit earned due to lowering interest. If the charges are less than the interest to be earned, then you are taking a right decision of going for balance transfer of loan. This method helps in understanding the integrity of your decision. After all, it is the benefit that you are looking for.

Option to recheck on collateral provided:

Always check the market value of your property mortgaged with existing bank. You must always discuss with your bank and negotiate in the terms of either lowering rate of interest or increasing loan amount. Try to give less security or lessen the interest rate further. This is because if you are handing over property towards collateral which is more than double the loan amount , then it is not a good deal for you.

Fecileness of banking:
Remember, you are a regular customer of your existing bank? You are familiar with the systems, processes and staff. Hence, you must also gain awareness with respect to your new bank. Your banking process must be easy and convenient for you. If your existing bank staff is impolite or not efficient in providing you banking services, then balance transfer is the best option for you.

Read terms and conditions before applying for BT:

This is an important step before applying for balance transfer. Go through the terms and conditions laid down by new bank. Some banks also provide facilities such as credit and personal accident insurance.
Thus, balance transfer facility is very useful in saving interest rate and if further requirement of loan, one must avail but after careful analysis.
Stay Alert and Stay Safe.

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