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A Cost-Benefit Analysis of Home Loan Balance Transfer

By Finserv MARKETS - Jul 31,2019
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How to Calculate Your Home Loan Affordability?

We generally take the decision to purchase a house or to get a home construction done after thoughtful consideration. After all, huge sums of money have to be paid and invested during various stages in the process. Most of us finance this investment through home loans that have a long tenure and a high principal amount. Therefore, the interest rate of the loan is a matter of great consequence for you as a borrower as even a slight rate fluctuation can affect your outflow significantly. If you find that your home loan is not offering the best rate of interest, especially when compared with other home loans in the market, you should not stick with the existing loan.

In such cases, a home loan balance transfer, also known as refinancing or simply as a balance transfer, from Finserv MARKETS, is a smart alternative. It is an option that a lot of people opt for, to avail lower interest rates on home loans available to them. If you have opted for a fixed rate of interest, you cannot avail the benefits of a reducing interest rate in the market. Even if you have a floating rate home loan, the lender may not lower the interest or may not reduce it enough. While you could try discussing with your bank to reduce the interest rate you are paying, if they are not amenable, you can consider shifting your loan to a different institution.

Balance transfer of a home loan happens when the entire unpaid principal loan amount is transferred to another lender for a lower rate of interest. This allows you to make effective, tactical use of existing interest rates that are being offered by different lending institutions across the country. If you have paid your dues on time without defaulting, then this process is usually quite simple at Finserv MARKETS, where you can get an online loan approval within three minutes.

Cost Benefit

Even though balance transfers may be lucrative, a cost-benefit analysis has to be done before you make your decision. There are three factors that have to be accounted for namely, the amount of loan unpaid, the interest rate offered and the remaining tenure of the loan.

The home loan balance transfer is popular due to the higher principal amount and the longest tenure involved than other loans. Therefore, even a slight interest rate cut will impact the final interest payable in a big way in the long run. However, if the unpaid principal amount is too low, or if the remaining tenure is too short, then a balance transfer may not be the best course of action, especially because banks charge a processing fee for making the said transfer.

However, the reasons for a balance transfer is also not limited to just better home loan interest rates. People do it for better services, or for a top-up on the existing loan that the current lender may not be willing to provide. By transferring your home loan to Finserv MARKETS, you can get access to extra funds in the form of a top-up loan. This loan is available to you at a low rate of interest, without additional documentation and has the same long tenure as your home loan, making repayment easy.

The cost of home loan balance transfer may also vary. If you have a home loan with a fixed housing loan interest rate or a personal loan, your existing bank may charge a prepayment penalty for transferring your loan. Or if you are making the transfer soon after you have taken the loan, your existing banker may charge a higher fee. It can be in the range of 0.25-1% of the outstanding loan amount, or it can be a flat fee. Some banks even charge an administrative fee. Such factors must be taken into account while opting for a balance transfer. However, with Finserv MARKETS, you can enjoy 100% transparency, with no hidden charges on a loan transfer.

While the benefits of making a home loan balance transfer are multi-fold but highly dependent on various other factors. A home loan agreement is not just a 20-30-year contract but also a long relationship that you share with your lender. Catering to your queries, submitting and executing transaction documents, time-to-time legal and technical checks, servicing of post-dated cheques, and informing the borrower about an EMI reduction, are a few things that the lender must do as part of its post-sale service. Your peace of mind will be directly based on how well these requirements are being met by your lender. If you have troubles with your bank’s services which keep recurring, you should consider moving to Finserv MARKETS for better services.

“Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we works towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.”


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Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522