26 March, 2025 | 11:00 IST
A personal loan balance transfer allows borrowers to move their outstanding loan balance from one lender to another, typically in exchange for a cheaper interest rate, better repayment conditions, or other benefits. It's a popular financial strategy to lower borrowing costs and make repayment easier.
Transferring the balance of a personal loan can help borrowers lower their monthly EMIs, save money on interest, or consolidate debt more efficiently. Before taking this step, let's know about the eligibility criteria, process and risks associated with it.
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A personal loan balance transfer is the procedure in which the outstanding loan balance is transferred from your current lender to a new one. The new lender pays off your existing loan and you begin repaying it to them instead, ideally at lower interest rates and better terms.
This service is provided by several banks and non-banking financial companies (NBFCs) in an effort to draw clients who have previously taken out personal loans from other organisations. The primary benefit of this action is the possible reduction in interest rates, which can result in cheaper EMIs and long-term savings.
Moneycontrol has partnered with eight lenders to provide you with quick, 100% digital loans up to Rs 50 lakhs. You can get the loan in three steps: enter your information, complete the KYC process, and set up an EMI term. Depending on your work status, interest rates can start as low as 10.5% annually.
Before transferring your existing loan to a new lender, analyse your current loan in terms of the outstanding balance, remaining tenure, new EMI amount and foreclosure charges. Here are a few simple tips to make the most out of the balance transfer facility:
These new terms usually come with a lower interest rate, which lowers the total amount of debt you have to pay back. You may also benefit from flexible repayment choices, such as a longer duration to reduce your monthly EMIs or the ability to pay earlier without facing hefty penalties. Some lenders also provide top-up loans, which let you borrow additional funds if you need them.
To qualify for a personal loan balance transfer, you must meet certain eligibility requirements, which may vary across lenders.
1. Good credit score
A good credit score is one of the most important considerations in getting a balance transfer. Most lenders prefer applicants with credit scores of 650 or higher. A higher score, ideally 700 or above, may help you get a cheaper interest rate and improve your chances of being approved.
2. Loan repayment history
Lenders usually require you to have completed a minimum number of EMI payments on your existing loan before allowing a transfer. It is usually required that you have made at least 6 to 12 EMI payments without any defaults.
3. Stable income
You must have a reliable source of income to ensure that you can pay back the new loan on time. Both salaried and self-employed people are eligible for a balance transfer, but they must show proof of income. Salaried applicants may need to submit salary slips, bank statements and Form 16, while self-employed individuals might need to provide income tax returns (ITRs), business financials and profit-loss statements.
A personal loan balance transfer has costs and expenses that should be carefully reviewed before moving forward, even though it can assist lower interest rates and EMIs.
1. Processing fees
One of the main expenses is the processing fee, which the new lender charges for handling the transfer. This charge can somewhat affect the overall savings and usually amounts to 1% to 2% of the entire loan amount.
2. Foreclosure fees
The former lender may also levy a foreclosure fee, often ranging from 2% to 5% of the remaining balance, if you are terminating your current loan before its duration is over. This fee compensates the lender for the interest lost when a borrower repays a loan early.
3. Documentation fees
Apart from this, some lenders may charge documentation costs for processing the required documents for the new loan setup. Even though this price is usually minimal, it contributes to the overall cost.
4. Loan protection insurance
Loan protection insurance is an additional potential cost that some lenders could demand in order to protect themselves against defaults brought on by unforeseen circumstances. While it is optional in many cases, if mandated, it increases the financial burden.
A personal loan balance transfer helps reduce interest rates, lower EMIs and improve repayment terms. With Moneycontrol’s online lending platform, you can get personal loan offers up to Rs 50 lakhs from eight lenders, starting at 10.5% interest per annum. The entire process is 100% digital.
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