Home Loan

Do’s And Don’ts In The Home Loan Balance Transfer Process

Borrowers consider Home Loan balance transfer when they wish to get a better deal from other lenders for lower interest rates, improved services, extended tenure, or top-up loan requirements. On transferring the loan, the new lending institution fully pays the outstanding balance with the current loan company. The borrower uses a home EMI calculator to select a convenient loan term and pays monthly EMIs to the new loan provider. Lower interest rates, extended loan tenures, and other benefits of loan transfer make repayment easier and more affordable for borrowers. The extent of savings largely depends upon the outstanding balance, the difference in the interest rates, loan them, and loan transfer charges.

Here are a few important do’s and don’ts that guide a borrower through a Home Loan balance transfer.

Do’s of a Home Loan Balance Transfer

1. Evaluate the Possibility of an HLBT

Before searching for new loan companies to transfer a loan, one should carefully read the current loan provider’s terms and conditions. Certain financial institutions restrict Home Loan transfers to other loan companies. If the current lender has such a clause, the only option left to the borrower is to renegotiate their current interest rates and loan terms.

2. Negotiate with the Current Lender

Approaching the current lender for renegotiation will save the borrower from the hassle of the Home Loan balance transfer process. Borrowers can demand a lower interest rate or revised loan term on the grounds of on-time repayments and a good credit record. Most loan companies would agree to reduce the interest rates instead of losing their existing customers. If the negotiation turns in the borrower’s favour, it will save a lot of money, effort, and time required for new documentation procedures and loan formalities.

3. Calculate the Cost of the Loan Transfer

Transferring a Home Loan involves numerous charges such as application fees, processing fees, administrative charges, inspection charges, etc. In some cases, banks also charge prepayment charges and transfer fees. The borrower must calculate these costs and ensure they are less than the amount they save with the loan transfer.

4. Study the Loan Terms and Conditions Carefully

The borrowers must follow the new lender’s terms and conditions after transferring their Home Loan balance. While lower interest rates are tempting, one must also study other terms and conditions related to the loan, including hidden charges, customer service, etc. Therefore, review their terms and conditions carefully to measure how much they will benefit from the Home Loan balance transfer process.

5. Check Credit Rating

A borrower’s credit score indicates whether or not they are eligible for a loan balance transfer. Those with a consistent repayment history have a high credit rating, making them more qualified for a loan transfer facility. Since the new finance company will consider the applicant’s credit score before accepting their loan transfer application, checking the credit rating and improving it is worth the effort to get the best deal.

Don’ts of a Home Loan Balance Transfer

1. Don’t Apply with a Low Credit Rating

Those with a history of missing EMIs have a high chance that a new housing finance provider will not accept their loan transfer application. Lending companies are free to make their lending decisions and always prefer borrowers with a consistent repayment history. A home EMI calculator helps choose a suitable term with EMIs one can conveniently afford.

2. Don’t Transfer the Loan if it is Already Near the Term End

Those already near their current loan term’s end might not benefit much from the Home Loan balance transfer. Moreover, it will prolong the lock-in period, during which the borrower cannot pre-pay or foreclose the loan. Since the borrower has already paid most of their Home Loan, the financial profits will not be worth all the effort.

3. Don’t Fall for Gimmicks

Loan companies use smart copywriting and advertising gimmicks to make an offer look great and attract new customers. However, an aspiring borrower should avoid these pitfalls, as there is no such thing as a free lunch. Take time to read the terms and conditions carefully and make an informed decision based on data and calculations.

Read a Similar Blog: When Should You Do A Balance Transfer Of Your Home Loan

As a word of caution, do not blindly go for the Home Loan balance transfer process just because another lender offers a lower interest rate. The final decision should be based on research, queries, and unique circumstances. Keep these do’s and don’ts in mind before taking the giant leap.