A personal loan is unsecured and provided by lenders to meet your requirements. It is offered based on key parameters like income level, employment and credit history, repayment capacity, etc. As it is unsecured, you do not require pledging any security or collateral like gold, fixed deposit, or property to avail of the loan. Thus, in the case of default, lenders cannot auction anything to meet the loan amount. Lenders compensate for the higher risk involved, i.e., the non-presence of security or collateral, by charging a higher personal loan interest rate than secured loan options.
As the personal loan interest rate is usually higher, many, after serving their loan EMI for a few years, begin thinking about the private loan balance transfer option. With a personal loan balance transfer facility, you can easily transfer your outstanding loan amount from an existing lender to another lender that provides a lower individual loan interest rate on exceptional loan proceed.
How does the personal loan balance transfer option function?
In the case of the personal loan transfer option, your new private loan lender repays all your outstanding dues to your existing lender. If your existing personal loan is attached to a fixed interest rate regime, you will bear a prepayment charge from your pocket. Additionally, as the personal loan refinance or transfer option is considered a new personal loan, you will also have to meet the processing charges. Thus, ensure to incorporate the prepayment charge on your existing loan and processing charge on your balance transfer loan to compute your overall savings on the transfer facility. After factoring in both directions, you still save a substantial interest constituent on your outstanding loan, then opt for the transfer option.
Here are the important benefits of opting for a personal loan refinance or private loan balance transfer option
Interest rate benefit – This is one of the major advantages of the balance transfer option. Opting for a balance transfer may lower your interest burden. However, before you click on the personal loan, apply online, vote for the balance transfer, and compare amongst different lenders to zero on the best lender offering the lowest interest rate on this facility. Once you have selected your balance transfer lender, use the personal loan EMI calculator to calculate the suitable EMI, overall savings, and preferred repayment tenure.
Extended repayment tenure –
When transferring your loan from an existing lender, you get the option to negotiate your repayment tenure. You can extend your repayment tenure on your balance transfer option to reduce your EMI burden. However, raising your repayment tenure lowers your EMI burden and increases your overall interest. Thus, keep your assignment as low as possible per your cash flow and repayment capacity. Doing so would allow you to enjoy a lower overall interest outgo.
Higher features –
Based on your repayment history and existing income, you get the choice to negotiate with the lenders for a better deal on loans like zero processing charges, waiver of last personal loan EMI, and reduced interest rate. You also get the option to opt for a top-up loan facility in case you require an additional loan to meet any of your necessary needs.
The personal loan balance transfer option allows you to benefit from a lower interest rate at better terms and conditions. But to get this facility easily, you must always keep a healthy credit behavior. A good credit profile boosts the lenders’ confidence in you and allows them to offer you a deal at the best terms. Also, before you hit the online loan application button, compare amongst lenders by visiting an online lending marketplace to choose the best lender per your preference and suitability.