Home Loan Balance Transfer: 5 Things To Consider Before Transferring Home Loan

June 04, 2020

Home Loan Balance Transfer: 5 Things To Consider Before Transferring Home Loan

A balance transfer is a process of moving your Home Loan from one bank to another for better interest rate and other benefits. Often, due to the rising expenditures and inflation, borrowers have to face high-interest rates.

High interest can have a direct impact on your personal finance, particularly when you’re burdened with a loan. In this article, let’s get to know how Home Loan balance transfer is the key and factors you should consider before you opt for it.

When it comes to buying a Home Loan, we always want to make sure that we get the best deal to save money. If you’ve taken a Home Loan and your bank is charging a high-interest rate, then you can avert the problem by choosing a balance transfer option. 

Balance transfer of Home Loan means you can switch the loan amount from one bank to another. It enables you to save on the interest. If you’re facing high-interest rate issue, you can consider this option. Before doing balance transfer, you must consider the following 5 factors:

  1. Negotiate on lower interest rate: Before doing the Home Loan balance transfer, negotiate with your existing lender for the low-interest rate. If you have a loyal association with your bank, then it may consider your request looking at your credit history and loan repayment capacity.
  1. Check for your credit rating: Your credit score gives you an indication whether you’re eligible for a balance transfer or not. Suppose you’ve been inconsistent in repaying credit on time, then it will hamper your credit rating. A poor credit score means you are less qualified for loan transfer facility, as the new bank will take into account your credit score along with the other factors.
  1. Charges involved: Balance transfer process involves processing fees, application fees, administration charges, inspection fees, among others. There will be some charges which will be charged by both your existing and new lender. Calculate if the cost of a balance transfer is less than your interest amount.

Repo linked loan: Repo Rate-Linked Lending Rate (RLLR) Loan is linked to the Reserve Bank of India’s repo rate. This is the rate at which banks borrow funds from RBI. If the RBI lowers the repo rate, banks that offer the RLLR-based loan also lower the interest rate. The Home Loan interest rate of the bank will move up or down based on the repo rate movements. RLLR Home Loan ensures transparency among borrowers if RBI increases or decreases the rate. Repo rate cut will have a positive impact on homebuyers as it lowers the interest rate on Home Loan. This in turn will reduce your EMI burden.

  1. Read terms and conditions before transfer: When you’ve chosen a lender for a balance transfer, make sure you read the terms and conditions carefully to avoid any hidden charges. Make sure you know what the new bank has to offer in terms of loan benefits.
  1. Recommendations: Experts advise to avoid balance transfer loan if you’re nearing the loan tenure or planning to sell your home in future.

A housing loan balance transfer may seem to be a beneficial option, but you need to weigh in the above factors.

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