Personal Loan Balance Transfer

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:

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:

^{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.}