The facility offered by banks/financial institutions to transfer the outstanding principal amount to another bank/financial institution is known as balance transfer.
The interest rates on balance transfer start from 8.90% p.a. while the repayment tenure range between 12 to 72 months. Balance transfer is available for all types of loans, including personal loans. Also referred to as refinancing, balance transfer is primarily done to reap the benefits of better interest rates and other features.
|Bank||Interest Rate (p.a.)||Repayment Tenure|
|ICICI Bank||11.29% onwards||12 to 60 months|
|HDFC Bank||15.50% to 21.50%||12 to 60 months|
|Canara Bank||11.00% onwards||Up to 60 months|
|Kotak Mahindra Bank||10.99% to 24% p.a.||12 to 60 months|
|IndusInd Bank||10.50% onwards||12 to 60 months|
|Axis Bank||8.90%||12 to 60 months|
|State Bank of India||11.95% onwards||Up to 72 months|
|Bank of Baroda||As per applicant’s risk rating||Up to 48 months|
|Indian Overseas Bank||11.90% onwards||Up to 60 months|
|Corporation Bank||12.85% onwards||Up to 60 months|
|Lender||Interest Rate (p.a.)||Repayment Tenure|
|Bajaj Finserv||12.99% onwards||12 to 60 months|
|HDB Financial Services||-||12 to 60 months|
|India Infoline||13% onwards||12 to 60 months|
|Mahindra Finance||-||Up to 36 months|
|Tata Capital||11.25% onwards||12 to 72 months|
|Aditya Birla Finance Limited||14%||12 to 36 months|
While doing a balance transfer to a new lender, you can also ask the new lender to offer you top-up on your new loan. When you opt for a top-up, you should choose a loan amount that that is greater than your outstanding balance. Your new lender will give approval for the loan if you fulfill the eligibility norms. The top-up amount will then be credited to your account by the new lender.
Let us understand that with the help of an example. Suppose you wish to transfer an outstanding balance of Rs.3.4 lakh to your new lender. In this case, you should apply for a loan of Rs.5 lakh. Once you do that, the new lender will transfer Rs.1.4 lakh to your bank account. The remaining Rs.3.4 lakh will be given to you as a cheque by the lender which you can use to repay the outstanding balance. This implies that after you do a balance transfer, your total outstanding will be Rs.5 lakh plus the interest.
The eligibility criteria for a personal loan balance transfer is the same as for a personal loan and varies from lender to lender. However, the basic eligibility criteria that most lenders look for, have been given below:
|Who Can Avail||Salaried applicants employed in private firms and government organisations|
|Age||21 years to 60 years|
|Work Experience||2 years of total experience out of which 1 year should be with the current employer|
|Minimum Monthly Income||Rs.15,000|
Though the documents required to do a balance transfer on your personal loan may vary from lender to lender, we have listed the basic ones for you below:
|Salaried Applicants||Self-employed Applicants|
If you have availed a personal loan, you should consider a balance transfer at least once during the loan tenure. This will lead to a reduction in your interest rates, consequently, empowering you to save on the interest that you must pay.
Let us understand this with the help of an illustration.
Suppose that you have availed a personal loan of Rs.3 lakh at an interest rate of 18% for a tenure of 36 months. In this case, your monthly EMI (equated monthly instalment) will be Rs.10,845 and the total interest you would be paying over the loan tenure will be Rs.90,446.
If, after 1 year, you do a balance transfer and the interest rate now is reduced to 11.29%, the principal outstanding on your loan amount will be 2,17,254. Your monthly EMI, in this case, will drop to Rs.10,115 and therefore, your total savings will stand at Rs.16,560. The same has been shown in the table below:
|Particulars||Loan Amount||Interest Rate (p.a.)||Tenure||EMI|
|Original||Rs.3 lakh||18%||36 months||Rs.10,845|
|After Balance Transfer||Rs.2,17,254||11.29%||24 months||Rs.10,155|
|Monthly EMI Saved||Rs.690|
If you wish to calculate the amount you would save by doing a balance transfer on your personal loan, you can use the balance transfer calculator available on the official website of the respective banks that offer the balance transfer facility.
A balance transfer on your personal loan is a good idea if your earning has increased or if the interest you are being charged on your current loan is higher than the one offered by a new lender. It is a great way to reassess your debt, make alterations to it, and adjust it as per your financial needs.
However, before you decide to go for a balance transfer on your loan, ensure that you bear the following things in mind:
Once you decide to go for a balance transfer on your personal loan, you can take any of the following routes to carry out the process:
Balance transfer on your personal loan is a good idea if:
When doing a balance transfer, you may have to bear the below-given costs:
It is a good idea to do a balance transfer on your personal loan during the earlier tenure of the loan as this is when a significant part of the EMI gets paid towards interest. Let us assume that you have taken a loan for a tenure of 4 years at 15%. You would have paid around 70% of the total interest during the first 2 years and so, if you decide to go for a loan transfer during the second half, the net benefit may be very little.
A majority of the banks offer the facility of balance transfer. However, just to make sure, do check with the lender if they offer the same by getting in touch with them either through phone, email, or by visiting their nearest branches.
The amount of time taken by banks to process a balance transfer may depend on the time taken by your existing lender to close the loan and issue a loan foreclosure letter. After that is done, you will have to apply for a loan with the existing lender and once it is approved, the loan amount will be disbursed to your account. The whole process should not take more than 8 days.
Anyone who has availed a personal loan for which he/she has made timely repayments for at least 12 months can opt for the balance transfer facility or even a top-up loan during the loan transfer.
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