Things to Keep in Mind Before Transferring Your Loan Balance

If you are facing difficulties in keeping up with your loan EMIs then you can transfer your loan from your current bank to another bank that’s offering a lower interest rate. In doing so you may also get a discount. However, is it always a good idea to go for a balance transfer? Perhaps, but perhaps not.

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While ideally, it would make sense to switch your bank when a better alternative is available for your loan, there are a few things you must keep in mind before making the final decision. These are:

Transfer Fee and Other Charges

Most banks charge a transfer fee which is a percentage of the balance being transferred (usually 1% to 3%). There may be other charges too such as legal charges, etc. So, you need to make sure that the money you willsave through a lower interest rate is more than the money you will be paying in the form of transfer fee and other fees.

Transferable Loan Amount

Many banks don’t allow you to transfer the full balance. So, if you are able to transfer only 75% or 80% of the actual loan balance then you will have to pay the remaining amount yourself.

Terms and Conditions

You can never be too prudent when it comes to banking and financing. So, be sure to read the terms and conditions before giving a final nod. Some banks require you to meet certain requirements such as getting a new credit card, buying an insurance policy in order to avail the loan transfer. So, unless you agree to these you must not sign the papers.

Transferring a loan has its advantages, but it’s important that you take all the factors into consideration before making a decision. Failing to do your homework can lead to complications in the future.