Taking a Personal Loan Balance Transfer

Factors to Consider before Taking a Personal Loan Balance Transfer

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28 Dec 2019
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Personal loans come handy in times of sudden financial needs. If you currently have a financial liability that needs immediate attention, you can opt for a personal loan to take care of it. The lenders offer the flexibility, which enables you to use the money for any purpose. You can use it to renovate your home, pay off a debt, go on a holiday, or your wedding. The personal loans help in times of medical emergencies too.

There are many lenders who offer this facility. You can opt for the loan from a financial company. The available choices come in plenty, which allows you to find a loan that offers the most affordable interest rates. However, there can be times when you might find the best offer from a bank after already getting a personal loan from somewhere else. That might sound unfortunate, but there is a way to solve that problem. You can choose the personal loan balance transfer option.

What is a personal loan balance transfer?

You might be wondering, “what is a personal loan balance transfer?” and the answer to that is rather simple. If you ever find a profitable offer on a personal loan from a bank after getting it from somewhere else, you have the option to transfer your existing loan balance to that bank. This process of shifting your personal loan from one lender to another is called the personal loan balance transfer.

One thing that you have to keep in mind is that the process requires thorough research. The lenders offer many different facilities with their personal loans. You need to closely compare the offers from your existing lender with the new one to determine which personal loan is more profitable for you.

Before you go with the process, there are many aspects regarding personal loan balance transfer that you need to understand. Take your time to make sure that you do not opt for a service that causes you loss.

Reasons to opt for personal loan balance transfer

There are many reasons to opt for personal loan balance transfer, and here is a list of the most lucrative ones.

1. Lower interest rate

The interest rate for any loan you take depends on multiple factors. The interest might change depending on your credit score, financial status, and the lender you are getting the personal loan from. Depending on these, the interest rate might vary.

Imagine a scenario where you have opted for a personal loan to renovate your house, and a year later you find a lender that offers discounted interest for the same loan. You surely do not want to remain stuck with your existing lender. So, you can use the balance transfer option to shift the loan to the new lender to enjoy paying lower interest rate.

2.  Better service

Not all service providers can be equal when it comes to quality. It is understandable that some banks or other lenders are always better at satisfying their customers with premium and more flexible services. If you think your current lender is not completely satisfactory with their customer service then you might want to take your business to a better one.

Before you transfer the balance of your personal loan to a different lender, be sure that the new one is actually better than the existing service provider. You can find their reviews online or ask around to get a better idea about the new lender. Once you are satisfied with what you find, transfer the balance to enjoy more satisfactory services.

3. Top-up loans

The lenders often offer additional benefits to attract more customers. One of the very common such benefits is top-ups. That means, when you transfer the balance of your existing personal loan to a new lender, they might allow you additional balance. That way, you will have some extra cash that you can use to meet your current financial needs. This saves you from applying for a new loan.

Factors to keep in mind

Before you opt for personal loan balance transfer, make sure that you are choosing the right lender. There are certain factors you can consider to determine that:

1. The equated monthly installment (EMI) 

One of the main reasons people transfer their balance to a new lender is the opportunity to pay lower EMI. However, you must always find out the tenure your new lender is offering. The extended tenure might lead to overall higher payment, which should be avoided.

2.  Processing fee

When you decide to opt for personal loan balance transfer, the new lender might charge you a processing fee. Depending on your existing lender, they might charge you for the same. Make sure that this additional cost does not result in a loss for you.

3. Terms and conditions

Before completing the transfer process, you must carefully read the terms and conditions of your new lender. Make sure that there are not any hidden clauses that can hurt your financial prospects. If you are confused about any particular term then talk to the lender to get a better idea.

4. Additional offers

Some lenders might offer you the chance to get a discount on any of their financial products when you opt for balance transfer. These additional offers often attract customers. Before you sign up for the new lender for an offer like that, make sure if you really require it or not.

5. Transferring to your bank

Sometimes, you require to open a savings account with the new lender in order to transfer the personal loan balance. That will result in additional charges. However, if the balance is transferred to your bank, where you already have an account, then you can save yourself from that hassle.

The personal loan balance transfer option can be beneficial to you, but only when you make sure that the move is the right choice. Do not be lured into an offer before closely studying it to determine if it is really profitable to you.

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