It is important that a customer conducts a thorough cost-benefit analysis while attempting to transfer one’s loan from the existing bank to a new one. And the most pertinent question to be asked before initiating a balance transfer is, “Are there any other costs involved while doing so?”
According to a leading bank’s website, balance transfer of loan is defined as the process wherein a customer transfers his outstanding principal amount to another bank or financial institution. This is done with the intention to negotiate a better rate of interest and seek additional features.
Therefore, if you too, as a borrower are looking to transfer your loan amount from one bank to another, our experts will guide you to crack the best deal.
BEAR IN MIND:
Amit Goenka, MD and CEO, Nisus Finance, puts forth a list of prerequisites that a borrower should not ignore:
Loan eligibility: Would the same or greater amount of loan (top-up) be sanctioned?
Credibility of the new bank: Is the new lending bank bigger or of greater credibility with requisite systems for client grievances, reporting, etc? Would the new bank be able to provide timely disbursement of loans, better customer servicing, be less volatile in changing loan terms, etc?
Project approval: Is the project approved or would it need to be approved by the new bank? After all, project approval can be timeconsuming and may not result in favourable terms for the borrower.
Commercials: Is the tenure, processing fees, loan cost, rate reset periodicity and basis, EMI amount payable better than the current loan? In short, our experts believe that only if the current home loan bank is unable to provide timely disbursements, has unreasonably increased the interest rates or charges, should one look at transferring the loan.
KNOW THE DRILL:
Balance transfer of loan is a complete product in itself and therefore it is treated as a new home loan application only. Therefore, if you, as a borrower are looking to transfer your loan amount, Ranjeet Kumar Mishra, chief credit officer, ART Housing Finance, provides you a step-by-step guide for the same:
Do a market study on the current home loan rates offered by HFCs and banks. Thereafter, find out the additional charges and fees sanctioned by the lenders for processing a home loan balance transfer;
Find out the net amount one can save from a balance transfer. If a borrower is saving a substantial amount, then he should transfer his loan to the new lender offering cheaper rates;
Submit your application to the new lender along with all documentation. Also, the customer has to submit loan account statement, foreclosure letter and a list of documents provided by the previous lender. The borrower will also have to inform about any other loan availed on the same collateral – such a loan needs to be closed before the balance transfer;
Once the new lender approves the loan application and the process is complete, a new loan account will be active with the new lender charging a new rate of interest and applicable charges as per the new agreement.
Times of India