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  • Personal Loan Balance Transfer

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  • 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 9.60% 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.

    List of Banks Offering Personal Loan Balance Transfer

    Bank Interest Rate (p.a.) Repayment Tenure
    ICICI Bank Upto 18.00% p.a. 12 to 60 months
    HDFC Bank 10.50% p.a. to 18.00% p.a. 12 to 60 months
    Kotak Mahindra Bank 10.25% to 24% p.a. 12 to 60 months
    IndusInd Bank 15.00% p.a. - 18.00% p.a. 12 to 60 months
    Axis Bank Up to 21% p.a. 12 to 60 months
    State Bank of India 9.60% p.a. onwards Up to 72 months
    Bank of Baroda 10.50% p.a. onwards Up to 60 months
    Indian Overseas Bank 10.80% p.a. Up to 60 months

    List of NBFCs Offering Balance Transfer

    Lender Interest Rate (p.a.) Repayment Tenure
    HDB Financial Services 16.75% p.a. onwards 12 to 60 months
    India Infoline 24% onwards 12 to 24 months
    Mahindra Finance Contact lender for information Up to 36 months
    Tata Capital 10.99% onwards 12 to 72 months
    Aditya Birla Finance Limited 14% 12 to 36 months

    Top-Up Loan and Balance Transfer

    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.

    Features and Benefits of Personal Loan Balance Transfer

    • Enhanced interest rate – When you opt for a balance transfer on your personal loan, you are doing so because the new lender is offering you lower interest rates. In the process, the burden on your EMI gets reduced while also helping you get off the loan liability faster.
    • Better features – Choosing to refinance your personal loan may help you fetch better deals from the new lender which may be in the form of low interest rate, low processing fee, etc. In a few cases, it may also help you end your association with a lender whose services you are dissatisfied with and establish a relationship with a new lender.
    • Extended loan tenure – Since you will be dealing with a new lender when you do a balance transfer, the terms and conditions associated with the loan will also be new. Hence, you can choose a repayment tenure that suits your budget. You can also add or delete co-applicants when doing a balance transfer.
    • Augmented loan amount – Balance transfer is really beneficial when the loan amount you availed initially is not adequate to fulfill your financial requirements and your existing lender does not allow you to take a top-up loan.

    Eligibility Criteria for a Personal Loan Balance Transfer

    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

    Documents Required to do Personal Loan Balance Transfer

    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
    • 3 months salary slips
    • Identity proof – Passport, Aadhar Card, Driving License, etc.
    • PAN Card
    • Address proof – Aadhaar Card, passport, voter’s ID, etc.
    • 2 photographs
    • Last 3 years balance sheet
    • Profit & Loss account statements
    • TAN Card
    • Last 6 months current account statements
    • Applicant’s savings account statements

    Illustration of How Personal Loan Balance Transfer Affects Your Repayments

    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
    Total Savings Rs.16,560

    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.

    How to do a Balance Transfer on Your Personal Loan?

    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:

    • Shop around to check for interest rates offered by various lenders on balance transfer. If the official websites of the banks do not have the interest rate specified, you can visit any branch of the bank or call their customer service helpline.
    • Use the balance transfer calculator to determine the amount you will save while doing a personal loan balance transfer.
    • Most lenders will charge a processing fee on the outstanding principal amount for doing a balance transfer. If the fee charged is too high, evaluate if it is worth doing a balance transfer.
    • Ensure that you go through all the terms and conditions associated with the balance transfer before you take the final call.

    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:

    • Visit the official website of the lender to apply for balance transfer online. Many lenders such as ICICI Bank, IndusInd Bank, Kotak Mahindra Bank, etc., offer the facility of balance transfer online.
    • Walk into the nearest branch of the bank from where you have decided to avail the balance transfer option with the relevant documents.

    Why go for a Balance Transfer on Your Personal Loan?

    Balance transfer on your personal loan is a good idea if:

    • You wish to choose a new lender who is offering better deals on personal loan.
    • Your income has increased by a substantial amount and you can afford higher EMIs to clear off the loan quicker.
    • There has been an improvement in your credit score and a new lender is ready to offer you better deals on the personal loan based on your credit score.
    • You wish to remove or add a co-applicant on your personal loan.
    • You want to stretch the repayment tenure to reduce the burden of higher EMIs.

    FAQs on Personal Loan Balance Transfer

    1. What are the costs involved in doing a balance transfer on your personal loan?
    2. When doing a balance transfer, you may have to bear the below-given costs:

      • Foreclosure charges, if applicable, to the existing lender which may vary from lender to lender.
      • Processing fee charged by the new lender
      • Any other costs applicable to the new lender such as documentation charges, stamp duty, etc.
    3. When is it ideal to do a balance transfer?
    4. 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.

    5. Do all banks offer balance transfer?
    6. 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.

    7. How long does it take for a balance transfer to happen?
    8. 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.

    9. Who can avail the balance transfer facility?
    10. 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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