Things to Look Out For When Transferring a Personal Loan

A balance transfer lets you move your outstanding debt to a lower-interest credit facility. As a result, you can repay the current liability while saving on the interest cost in the long term.

This is an excellent choice if you run high outstanding debt or benefit from a lower interest rate. Here are four benefits of transferring your exceptional loan to another lender.

1. Reduce your interest cost.

A lower interest rate is a common reason to transfer the outstanding personal loan from your existing lender to another institution. This may reduce your equated monthly installment (EMI). However, if a lower EMI impacts the total outflow over a longer duration, a loan transfer may not be beneficial. Retaining the loan with your existing lender is advisable if there is only a marginal drop in the EMI.

2. Debt consolidation

Consider consolidating the entire debt into a single account if you have multiple credit card balances and a personal loan. This makes it easier for you to manage your whole outstanding debt. You are assured of not missing an EMI payment, and keeping track of the loan account becomes simpler.

3. Improved services

If you are unsatisfied with the customer service your existing lender provides, you may consider a balance transfer. The new lender may be able to deliver better services, which makes it more convenient.

4. Top-up facility

Sometimes, the new lender may provide you with a top-up facility when you transfer the existing loan balance. This allows you to avail of a higher amount, which may be used for any purpose.

However, before you decide to transfer the balance loan amount to another lender, here are four things you need to consider.

5. Processing fees

Before you apply for a personal loan balance transfer, you must check the applicable one-time processing fees. The new lender often levies this and will increase the effective interest rate on the balance transfer. In most cases, lenders set a certain percentage of the outstanding balance being transferred as the processing fee.

6. Terms and conditions

Before you sign the loan transfer documents, you must understand all the applicable terms and conditions. You must check the terms and conditions of your existing lender and the new financial institution. Moreover, ensure your current lender provides all the documents for a hassle-free procedure.

7. Additional benefits

Some lenders may offer additional benefits, such as free credit card or accident insurance coverage, when you transfer your loan balance. You must not move the loan only because of the added benefits. You should analyze if you require these additional benefits before you move your loan.

Applying for a balance transfer to take advantage of lower personal loan interest rates is tempting. However, you must evaluate your requirements and understand the pros and cons of this option before deciding. You must comprehend all the long-term implications of your decision and ensure the new loan will not be costlier. Most importantly, make sure you can make timely repayments to avoid negative repercussions or face financial difficulty.