Home Loan Balance Transfer is a smart way to capitalise on lower interest rates offered by other financial institutions. Read on to know how you can go about it.
Are you bogged down, financially, by the high rate of interest levied on your Home Loan? Are your monthly payments keeping you away from living the life you’ve desired? Then it’s time you put a brake on that and move to another lender who has a better offer for you. It’s now possible to approach another lender and transfer your Home Loan with reasonable Home Loan transfer charges and get a shorter tenure.
But, before you dive into this trending refinancing alternative, take a moment to understand this procedure better. Let’s take a look at a couple of steps you need to take care of, to benefit from this move.
Research Interest Trends
You need to keep an eye on the current interest rates in the market. Approach a couple of lenders who offer this product and compare their offers before you zero in on one.
Keep in mind, though, that you need to consider the remaining tenure of your Home Loan before transferring it. Some lenders prefer customers who have successfully paid off a minimum of 6 EMIs. If you’ve just got yourself a Home Loan, then switching early makes more sense, as you can save up on the interest charges. However, if you’re nearing the end of your Home Loan tenure, then sticking with the existing lender makes more sense.
Negotiate with the Current Lender
When you approach your existing lender you’d be asked to submit a letter requesting for a loan transfer. Sometimes, your current lender would offer a lower rate of interest in order to retain you as their customer. This is where you need to take a judgement call. If the new offer from your current lender seems better than the one you’re going for, then it’s advisable to continue with the same lender.
If you want to go ahead with the transfer, you’d be given a consent letter, NOC, and a document stating the outstanding balance of your loan. Once you submit these documents to the new lender, they’d settle the debt with your current bank, or NBFC, and get an account closure letter. Your documents would be handed over to the new lender from the old lender and all your post-dated cheques/ECS would be cancelled.
Inspect your Credit Score and Report
Having a good credit score is important when looking for a loan approval. No matter which financial institution you select for your Home Loan Balance transfer, they would check your credit report and CIBIL score before they give the green light. If you have a lower credit score, then your application would either get rejected or your Home Loan will come with a high rate of interest. But, if you have a high credit score, you’ll be able to avail a low rate of interest for your Home Loan.
Factor in expenses like Home Loan transfer charges, processing fees of the new bank or NBFC, inspection fees, documentation cost, stamp duty, and insurance fees when estimating the profitability of the Home Loan Balance Transfer. Also, it would be wise to calculate Home Loan EMIs as well, before you sign up for the loan.
