If you are paying high interest on a personal loan, transferring the outstanding balance to another lender offering a lucrative deal is a good option. It will lighten the burden of debt considerably. However, before availing this opportunity it’s important to factor certain things to ensure it is a good call.
Is the personal loan EMI straining your monthly budget? Why not consider a balance transfer! It is a process that involves moving the unpaid amount of the borrowed money from your current lender to another provider offering beneficial terms and conditions. The shift will lower the cost of the loan and ease the financial liability to a large extent. While a balance transfer may appear like an ideal solution to your predicament, there are few things that must be factored before taking the plunge. Read on for 5 aspects to keep in mind before switching lenders.
- Attractive Interest Rates: The benefit of a lower interest rate is perhaps the best reason to move your personal loan from one provider to another. Let’s face it, the transfer of loan balance makes sense only when the offer by the new lender is better than that of existing provider. Lower interest rate lessens the stress on the wallet and helps pay off the loan faster.
- Tenure of the New and Existing Loan: Lenders try tactics like offering lower monthly EMIs over a longer time span. The package may seem tempting but it’s prudent to calculate the total outflow towards the loan. Remember, a longer tenure translates into a higher interest pay-out. So, calculate the total outflow of both the loans and opt for the one which is cost-effective.
- Top-up Options: You are in dire straits and need a top-up loan, but your provider is unwilling to oblige? A balance transfer comes in handy if your new lender offers the facility of additional funding on an existing personal loan. This is a win-win situation! You can avail a lower interest and borrow extra money with minimal paperwork and without any trouble.
- Better Service: Dissatisfied with the service offered by your present lender but holding on until the personal loan is cleared? You can end the association and start afresh with another bank or financial institute by shifting your outstanding balance to them. Besides enjoying a stellar service, you can save on interest charges.
- Charges and Fees: The transferring of loan comes with some charges. You may be asked to pay pre-closure costs to your existing lender depending on the amount that is being moved. In addition, there are processing fees, documentation charges, penalties etc. that may be levied. It is therefore imperative to factor these expenses and calculate the overall savings from a lower interest to determine whether the switch is a viable option.
There’s no denying that a personal loan balance transfer comes with numerous benefits and hence is worthy of consideration. Nonetheless, one needs to be cautious and do some homework. It is important to scan the fine print and evaluate the proposition carefully to ensure the new loan will help save money before swapping lenders.