Assume that you take out a home loan from a bank whose interest rate is 14%. You begin paying the installments as per your schedule. After a few years, you realize you’re paying more than the agreed-upon 14% interest rate.
What do you do?
Though you bring it to the attention of your banker and request a rollback to 14%, you don’t get any cooperation. At such a time, a home loan balance transfer comes in handy.
As the name suggests, your remaining loan amount is transferred to another bank or lender, where you get a lower interest rate. This lender pays the bank on your behalf, and you continue to pay the monthly installments on your loan.
In banking terms, this is also a pre-approved home loan balance transfer.
Once you transfer your home loan balance, you save the money you would pay in monthly installments. Now that you have a new lender, you can get lower prepayment rates, a longer payment duration, and better interest rates.
You can also take out another home loan with your new lender equal to the balance home loan amount that needs to be repaid.
Advantages of a Home Loan Balance Transfer: Why You Should Consider It
You get several benefits through a home loan balance transfer to another lender and getting a lower interest rate.
These include better repayment interest rates, pre-approved offers, flexible tenure, and better customer service. Its other benefits include:
1. Lower Rates of Interest
Your new lender offers you a reduced interest rate with a home loan balance transfer. He also offers you better repayment rates. The repayment terms offered by your new lender may differ from those offered by other lenders.
For instance, your new lender might offer you a convenient repayment tenure. He could also provide you with some flexibility with EMI payment dates.
2. Avail Yourself of Pre-approved Offers
Periodically, lenders advertise their pre-approved offers to bring in more new customers. They offer huge discounts on home loans and throw in other attractive benefits too.
If you are interested in procuring such an offer, you need to check with your bank or lender.
3. Ask for a Home Loan Top-up
Getting your home loan topped up is a good idea if you’re short of money. With the extra cash, you can buy everything you need, like furniture for your new home.
If your bank does not offer a top-up facility, you can always transfer your existing home loan amount to another lender.
4. Avail Yourself of Better Services with Your New Lender
If you know that another lender offers better services than you’re getting now, you can switch.
For example, perhaps you have been associating with a lender who doesn’t provide customer service 24×7 or payment of your EMIs online, but you now know of one who does.
So, why not go over to him?
How to Do a Home Loan Balance Transfer: A Step-By-Step Guide
Do you want to transfer your home loan balance to another lender? If you are and want to know how to go about it, here are the steps to follow:
1. Identify the Bank or Financial Institution as Your New Lender
First, be clear about which bank or financial institution you want as your new lender. You will transfer your home loan balance here.
For peace of mind, choose one that operates under Reserve Bank of India (RBI) regulations and has excellent credit ratings.
2. Request Your Present Home Loan Provider for a Loan Statement
In Step two, request your present banker for a statement of your home loan. Also, ask for a No Objection Certificate (NOC) to initiate the transfer of your home loan balance.
3. Negotiate with Your Current Banker
Speak to your current lender and ask if he can offer you any special deals. These may prevent you from making the switch. After all, moving from one lender to another is both expensive and lengthy.
So, if you can continue with your current lender but at better terms, that would be ideal. Else, you can opt for another lender.
4. Submit All Relevant Documents
Get in touch with your proposed new lender and submit your documents to him. Do not part with your KYC (Know Your Customer) and NOC (No Objection Certificate) documents at this stage.
However, ensure that you hand in a copy of your title deeds, loan balance statement, interest statements, and application form.
5. Await Your Current Lender’s Confirmation of Account Closure
Now that you have handed over your documents to your new lender, you need to wait for the old lender to inform you that he has closed your loan account.
6. Get Approvals from the New Lender
By now, your new lender will have approved your loan. Your earlier bank will transfer the loan account to the new lender. You now have a new lender at comfortable repayment rates.
With the above knowledge at your fingertips, you may want to take the first step to transfer your home loan to another lender. If you’re unsure or have doubts, you can access the Piramal Finance website at www.piramalfinance.com. One of India’s leading financial institutions, Piramal Finance deals in housing, business, and personal loans. Learn about its vast range of products and services.