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Personal loan balance transfer (PLBT) is the process of transferring your personal loan from your present lender to a new lender. If you have an outstanding loan with a high interest rate, you can transfer it to another lender and enjoy a lower rate of interest. This transfer of balance allows you to lower the burden of your monthly obligations.

Personal Loan Balance Transfer Charges

While Personal Loan Balance Transfer charges might vary from lender to lender, generally, you must pay two types of charges for transferring your personal loan to a new lender:

  • Foreclosure Charge: It is usually around 5% of the outstanding principal amount. It needs to be paid to your present lender.

  • Processing Fee: This fee is to be paid to the new lender with whom you wish to transfer your loan. It usually ranges from ₹999 to up to 2% of the loan amount.

Features of Personal Loan Balance Transfer

  • Better Rate of Interest: Lower interest rates reduce the borrower's interest burden. It is always better to assess the need, evaluate the offer, and compare the interest rates and other features before making a Personal Loan balance transfer.

  • Longer Loan Tenure: When you transfer a personal loan, you can potentially negotiate the tenure and get it extended as per your requirements. With an extended loan tenure, you can have a lower monthly burden of EMIs but a higher total interest payout.

  • Top-up Loan Facility: Many lenders offer a top-up loan facility with personal loan balance transfer. In the case of top-up loans, the outstanding loan balance is directly paid to your previous lender and the fresh loan amount is credited to your account.

  • Better Personal Loan Features: Depending on your credit history, you may get an offer from other lenders offering better features on personal loans such as waiver of last EMI, zero processing fees, lower interest rates, etc. The personal loan balance transfer facility can, thus, not only reduce your personal loan interest burden, but you might also get a loan with better features.

Personal Loan Balance Transfer Eligibility Criteria

The following are the key eligibility criteria for a Personal Loan balance transfer:

  • The outstanding loan amount has to be at least ₹50,000

  • You need to provide a record of your personal loan EMI payment. Ensure all of them are cleared or at least the previous twelve instalment payouts of the existing loan will be checked

  • If you have numerous loans/credit cards, you need to ensure all are in good standing as per the requirements

Documents Required for Personal Loan Balance Transfer

You need to submit the following documents while applying for a personal loan balance transfer:

Application Form

A duly signed Personal Loan Balance Transfer application form

Identity Proof

PAN card/driving licence/passport/voter’s ID/Aadhaar card, etc.

Address Proof

Aadhaar card, passport, landline bill, electricity bill, rent agreement, etc.

Age Proof

PAN card/driving licence/passport/voter’s ID/Aadhaar card, etc.

Income Proof (for salaried employees)

Bank account statements for the last 6 months 

Salary slips for the last 3 months

Income Proof (for self-employed individuals)

The balance sheet of the last 3 years along with the profit and loss statement of the business

Bank statements of the last 6 months of individual and business

Process of Personal Loan Balance Transfer

You can easily transfer your personal loan from one lender to another by following the steps mentioned below:

  • Step 1: Check the interest rate, processing fee, and the loan tenure that the new lender is offering. It is a good idea to check for a balance transfer offer with multiple lenders and then shortlist one best suited for you.
  • Step 2: Compare the new loan offer with your existing loan and calculate the savings. Make sure that you also consider other charges such as foreclosure charges (to be paid to your present lender) and the processing fee of the new loan.
  • Step 3: Once you have decided to transfer your loan to a new lender, apply for foreclosure with your present lender and obtain an NOC (No-Objection Certificate) for the same.
  • Step 4: Start your balance transfer application with the new lender. You will be required to submit the NOC obtained from your old lender to the new lender.

Once the balance transfer process is complete, your old lender will receive the outstanding amount from the new lender. Post this, you owe the outstanding amount to the new lender.

Personal Loan Balance Transfer Illustration

Let us assume that you have taken a personal loan of ₹5 Lakhs from a bank/NBFC at an interest rate of 15% p.a. for a tenure of 5 years. Now, after having paid 12 EMIs, you wish to transfer this loan to a new lender who is charging an interest rate of just 11.50% p.a. In this case, you will be saving ₹35,710 on the total interest amount. The following table gives you an illustration of the EMI payable to the new lender and your net savings:

Original Loan Amount

₹5 Lakhs

Existing Rate of Interest

15% p.a.

Original Repayment tenure

5 years (60 months)

EMIs Paid

12

EMIs Pending

48

Existing EMI

₹11,895

Outstanding Loan Amount

₹4,27,401

New Rate of Interest

11.5% p.a.

New tenure

48 months

New EMI

₹11,150

Total Savings

₹35,710*

Disclaimer: Please note that lenders charge a foreclosure fee on Personal Loan prepayment so net savings may vary. Please check with your lender before proceeding.

FAQs on Personal Loan Balance Transfer

  • ✔️Who can avail the personal loan balance transfer facility?

    Anyone who has availed a personal loan from a financial institution can get their loan transferred to another bank/NBFC if they feel they are getting a better offer.

  • ✔️When should one opt for the balance transfer on personal loans?

    A personal loan balance transfer is an ideal solution to settle your debts at a lower interest rate. A personal loan is transferred to save on the interest amount and reduce EMIs by switching to another personal loan with a lower interest rate. Moreover, you can also avail an additional top-up from the new lender.

  • ✔️What is the repayment tenure in case I opt for the balance transfer of my personal loan?

    If you opt for a balance transfer on your personal loan, the repayment tenure usually ranges from 1 year to 5 years.

  • ✔️What are the costs involved in personal loan balance transfer?

    While the cost involved varies from lender to lender, generally, two types of charges are to be paid on personal loan balance transfer:

     

    • Foreclosure Charge: It can be anywhere between 2% to 5% of the outstanding amount depending upon the lender. This foreclosure charge needs to be paid to your existing lender.

    • Processing Fees: This fee needs to be paid to the new lender, where you want to transfer the loan. It usually ranges from ₹999 to up to 2% of the loan amount.

  • ✔️Can I avail more money by opting for a balance transfer?

    Yes, you certainly can. Most banks offer a top-up loan facility along with personal loan balance transfer. In the case of top-up loans, the outstanding loan balance is directly paid to your previous lender and the fresh amount of loan gets credited to your account.

  • ✔️Does personal loan balance transfer affect my credit score?

    Personal loan balance transfer does not directly affect your credit score. However, if your loan EMIs are reduced, it would be easier for you to ensure timely repayment, which will improve your credit score in the long run.

  • ✔️Do I need to submit any collateral or security while applying for a personal loan balance transfer?

    No, since a personal loan is an unsecured loan, you need not submit any collateral while applying for a personal loan balance transfer.