A personal loan balance transfer is a legal financial method that one can use to reduce the overall interest rates. This method is for those who wish to choose more affordable interest rates, wherein one can balance transfer personal loans to seek lower interest rates. This also means that one pays back the remaining outstanding amount at a reduced interest rate.
What is a Personal Loan Balance Transfer?
A personal loan balance transfer is like moving your existing loan from one bank to another for better interest rates and terms. This is considered one of the best ways to make one’s loan repayment affordable. Instead of sticking with the original lender, you switch to a new one that offers better repayment benefits.
When is the right time to consider a personal loan balance transfer?
You can opt for a personal loan balance transfer if you think that you are been charged a high interest rate. You can evaluate your existing loan’s interest rate, processing fee, and repayment terms to lower your financial burden over time.
Understanding the Top-Up Loan and Balance Transfer
A top-up loan is opted by a borrower if they need additional funds or improved terms and conditions for their existing personal loan. Whereas, a balance transfer involves moving a personal loan from one bank to another for better terms. Both options offer financial flexibility and aim to reduce the financial burden on a borrower.
Example of How Personal Loan Balance Transfer Impacts Your Repayment
Personal loan balance transfer is a modern method to transfer a loan to other banks which is relatively offering a low interest rate. This not only impacts the overall monthly EMI amount but also reduces the financial burden. For instance, if you took a personal loan from the SBI with a relatively higher interest rate, and you decide to move to HDFC Bank which offers a low interest on personal loans. However, for a loan balance transfer, you need to consider the overall balance transfer fee, processing fee, and other charges to make the repayment method smooth.
Example:
Suppose you took a personal loan of INR 5,00,000 from the State Bank of India (SBI) with an interest rate of 15% per annum for a tenure of 5 years. Your monthly EMI (Equated Monthly Installment) for this loan would be approximately INR 11,895.
Now, after a year, you find that HDFC Bank is offering a lower interest rate of 10% per annum on personal loans. You decide to opt for a balance transfer to HDFC Bank. However, in the process of transferring the balance, you need to consider the overall balance transfer fee, processing fee, and other associated charges.
Let’s assume that the balance transfer fee is 1% of the outstanding loan amount, and the processing fee is INR 5,000. So, the total cost for the balance transfer would be:
Balance Transfer Fee = 1% of INR 5,00,000 = INR 5,000
Processing Fee = INR 5,000
Total Cost of Balance Transfer = Balance Transfer Fee + Processing Fee
= INR 5,000 + INR 5,000
Total Cost of Balance Transfer = INR 10,000
Now, your outstanding loan amount with SBI is INR 4,50,000 (original loan amount – one year’s worth of EMIs). After the balance transfer to HDFC Bank, your new loan amount with HDFC becomes INR 4,60,000 (outstanding loan amount + total cost of balance transfer).
With the lower interest rate of 10% per annum at HDFC, your new monthly EMI would be approximately INR 9,788.
By making this balance transfer, you save on interest payments and also reduce your monthly EMI, making it more manageable. However, it’s essential to consider the total cost of the balance transfer to ensure that the overall financial benefit justifies the transfer.
Processing Fees and Charges Loan Transfer
Go through the table below to learn about the processing fees for the personal loan balance transfer offered by different banks along with the loan repayment tenure.
| Bank Name | Processing Fee | Loan Repayment Tenure |
| HDFC Bank | 11.00% p.a. to 21.00% p.a. | 12 to 60 months |
| Kotak Mahindra Bank | 10.99% onwards | 12 to 60 months |
| IndusInd Bank | 10.49% p.a. – 26.50% p.a. | 12 to 72 months |
| Axis Bank | 12.00% p.a to 21% p.a. | Up to 60 months |
| State Bank of India | 10.65% p.a. onwards | Up to 72 months |
| Bank of Baroda | 10.25% p.a. onwards | Up to 84 months |
| Indian Overseas Bank | 11.90% p.a. onwards | Up to 60 months |
Also, read:
What is the Maximum and Minimum Tenure for Personal Loan?
How to transfer your existing personal loan?
- Step 1: Review the terms and conditions of your current personal loan i.e. interest rate, remaining tenure, and any associated charges.
- Step 2: Check out the eligibility criteria of the new lender before processing the balance transfer process. Some of the basic factors are a good credit score, a stable income, and a satisfactory repayment history
- Step 3: Complete the application process for a balance transfer with a personal loan with the chosen lender. Attach all the necessary documents, including proof of identity, address, income, and details related to your existing loan
- Step 4: Opt for the document verification to prove your credibility post which a sanction letter shall be issued. This will comprise of terms and conditions of the balance transfer personal loan.
- Step 5: After approval, inform your existing lender about the balance transfer. The new lender will usually settle the outstanding amount directly, closing your previous loan
- Step 6: Complete the documentation process with the new lender, review the terms, and sign the loan agreement. Once all formalities are completed, the new lender will disburse the personal loan amount
Features and Benefits of Personal Loan Balance Transfer
The following are the major features and benefits that one enjoys with a balance transfer personal loan.
- Opting for a personal loan balance transfer allows borrowers to transfer their existing loan to a new lender offering lower interest rates. This eventually reduces the overall cost of the loan thus resulting in savings for the borrower
- A balance transfer personal loan is a great way to enjoy low-interest rates for a borrower. Suppose a borrower is getting lower interest then he can choose a personal loan transfer to other banks to reduce the monthly EMI amount
- Negotiation with the lender is yet another advantage that a borrower gets to enjoy with a balance transfer loan. The borrower becomes eligible to negotiate for better tenures and repayment schedules thus reducing the financial burden
- Transferring a personal loan provides the borrower with the chance to access enhanced features offered by the new lender. One gets to enjoy features like flexible repayment options, top-up loans, or other perks that contribute to a more favourable borrowing experience
Eligibility for Personal Loan Balance Transfer
Initiating for balance transfer personal loan is a simple process and one has to fulfill the basic eligibility criteria. The bank has prescribed detailed eligibility for loan balance transfers. Those who fulfill the basic eligibility become eligible for a personal loan transfer to other banks.
| Balance Transfer Personal Loan Eligibility Criteria | |
| Nationality | Indian |
| Age Limit | 21 to 60 years |
| Eligibility to Avail | Salaried Employees, Self Employed, MNC |
| CIBIL Score | 685 or higher |
| Minimum monthly salary | Rs 20,000 onwards |
Required Documentation Personal Loan Transfer
A lot of documents are required when opting for a personal loan transfer. The banks have offered a list of documents separately for the salaried applicants and self-employed. One should keep these documents handy for a seamless process.
| Salaried Applicants | Self-employed Applicants |
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Conclusion
On a final note, the balance transfer process for a personal loan offers an opportunity to lower interest rates and improve overall loan terms. By doing this one can receive a favourable loan structure and manage their finances efficiently. However, one should compare the interests before opting for a balance transfer personal loan.
FAQs
Question: How long does the process of Personal Loan Balance Transfer take?
Answer: It takes around 2 to 3 business days for the whole process to work out.
Question: Can transferring a personal loan balance impact your credit score?
Answer: Yes, transferring a personal loan balance can impact your credit score in both negative and positive ways.
Question: Can I get more money with a balance transfer?
Answer: No, a balance transfer can only relax the interest rates and overall terms and conditions.
Question: Is collateral or security required for a balance transfer application?
Answer: No, one is not required to submit any collateral or security required for a balance transfer application.
Question: Do all banks provide balance transfer services?
Answer: Yes, the majority of the private and public banks in India provide balance transfer services.
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