Eg: Mr. X took a home loan at 11.50% in the year 2010 for a period of 20 years. Now in 2015, the rate of interest is 8.50%. So that means you are repaying your home loan at a higher rate of interest when you could have been paying lower EMI.

What can you do in such a situation?

Balance transfer. A home loan balance transfer allows you to switch your home loan from existing bank to a new bank. This means you can avail all benefits that the new bank is offering. Mostly customers would switch to a new bank only because they are being offered lower interest rates, better terms and conditions.

What are the features of a balance transfer?

A housing loan balance transfer has multiple features like:

Lower Interest rates – The first most important reason why a customer would move to another bank is due to the new bank offering lower interest rates.

Top-up to outstanding loan amount – The next best reason a customer would opt for a balance transfer is the new bank offers you a top up loan amount above the current home loan amount. This means you get extra funds at lower rates.

Reduced or zero hidden charges – New banks would offer better terms and conditions than your existing bank as they want a new customer. Hence they would reduce or exclude all your hidden charges.

Customized repayment options – New banks will also offer better repayment options and benefits like interest free holiday and many more exciting offers to ensure you apply for a home loan balance transfer from them.

Prepayment is allowed – In order to ensure that your EMI burden falls sooner than ever, Banks provide prepayment option to their customers if they choose to shift their home loan via balance transfer. Usually they would not charge any fees when you transfer your home loan balance to the new bank.

These features of balance transfer help you in saving a lot of money. Hence please read all loan offers carefully. Research on Banks that are providing better deals so you can transfer your existing home loan to their bank. Apply via Ruloans and compare loan options from more than 20+ Banks and NBFCs.

What is a loan balance transfer?

A loan balance transfer is when you can shift your current outstanding loan amount from the old lender to a new lender. You can do this because the new lender might be offering better interest rates and better terms and conditions. Also, for those who have a home, a balance transfer makes sense because of the longevity of the home loan. With shifting the loan to a new lender, you will pay a lower EMI until the tenure ends. This ensures you can save a lot of interest money.

However, taking this decision is not easy and only after careful consideration, must a customer take this step. To help our customers, we have made a set of few questions which a customer must ask themselves before transferring their home loan. They are mentioned below;

What Questions to ask before transferring home loan?

Is the deal worth it?

It is very important to understand that a balance transfer is not a joke. This process will change a lot of things and hence you need to be very careful. You have to calculate if moving your loan to the new lender will prove profitable to you. That means that the savings made from the new lender is more than the cost it will take to move the loan from the old lender.

New lender offering better terms?

Interest rate should not be the only reason of moving your loan from the old lender to the new lender. If the new lender can offer you better terms than the previous lender, this would be a good decision then. Terms could be related to interest free holiday period, no prepayment penalty, top up loan facility etc.

Do I Have a Better credit score?

This question can help you negotiate a better deal with the new lender. Having a low credit score will not help you while transferring the loan too. A lender would prefer looking at your credit score while determining your repayment ability. If you have a very good credit score, then you can negotiate with the lender to lower down the interest rates even further.

Hence before taking the decision of a home loan balance transfer, ask these questions and then plan accordingly.

Loan Amount – 40 Lakhs

Loan Tenure – 25 years

Interest Rate – 9%

EMI Amount – 33,568

Sunil has 20 years to repay the loan. He has been barely managing his family expenses along with repaying the home loan EMI for the initial months. Few days ago, NBFC’s have increased interest rates by 2% on all loans. This news did not go well with Sunil as he will now have to pay a higher EMI.

Previous EMI prior to rate increase – 33,568

New EMI after interest rate hike – 39,205

Difference in EMI – 5,637

As you can see, there is a huge gap between the EMI what Sunil had to pay earlier and the amount he has to pay now after the interest rate hike. This is bad news for the middle class families that have to use a major part of their income towards repaying the home loan. Now, they will have to increase their savings level in order to accommodate the home loan repayment.

NO!

This is not just the only solution. Ruloans has always worked towards customer satisfaction and hence we have the best solution in this scenario; “HOME LOAN BALANCE TRANSFER”.

Yes, using a home loan Balance Transfer, you can shift your current loan from an NBFC to a Bank. The Banks have not increased their rates and hence when you compare it with the NBFC’s rate, you’ll find a big difference. You can take advantage of this scenario and shift your loan. This will ensure that you will save a lot of interest money. This is how the scenario would look like if you shift your loan from an NBFC to a Bank.

As you can see, if you shift your loan from an NBFC to a Bank, you can save a lot of money. Sunil can save approximately 7000 rupees on his EMI with this shift. This is a huge amount which he can utilize on family expenses or else in building a corpus fund. Hence this is the correct time to shift your home loan and enjoy benefits like Lower EMI, Lower Interest rates and better loan terms.

Here’s a final comparison of the difference Loan EMI between a Bank and NBFC.

Ruloans advises its customers to look for changes in the interest rates and always seize the opportunity of using a home loan balance transfer as this can not only help you save lot of money but also give you a wide range of benefits like Top up loan etc.

With Ruloans, you don’t need to worry about such a situation. We have a solution that can help you lessen your loan burden. The solution is  a “Home Loan Balance Transfer”.

What is a Home Loan Balance Transfer?

A home loan balance transfer is when you shift your ongoing home loan from your current lender to a new lender.

Why would you use this facility?

It is highly possible that your lender might increase the interest rates and this can affect your monthly EMI. Hence you can look for other lenders who have better deals and are offering lower interest rates. Choose the best lender as per your needs and save a lot of interest money. The lender might also help you with better terms and another facility of a top up loan which you can use to fulfill your short term needs.

What are the steps in loan balance transfer process?

Compare options: Have you decided to take a loan transfer? That’s good. Your first job would be to check the number of lenders in the market and check what interest rates the other lenders are offering. Post this, you can also check the different charges and terms that are being offered. After this, compare all these 3 parameters and choose your best lender.

Negotiate with your current lender: Once you have decided the lender of your choice don’t go right away with the process. Please talk to your current lender first. Explain the terms that another lender is offering. Request your current lender to provide you with these terms. If negotiating with them works, then you save yourself a lot of time and money. If the negotiating doesn’t work then you can shift your loan to the new lender and save money.

NOC from current lender: If you have made up your mind on shifting to a new lender, then your next task in the process would be to get a “No Objection Certificate” from the current lender. Once you get that, you can go ahead with the process and talk to the new lender.

Document collection: Once the process begins, it is important that you get all the property documents, post dated cheques (if any) and any other such documents. This needs to be submitted to the new lender. Either this or else your current lender will transfer these documents to the new lender.

Close your loan with the current lender: Once the new lender gets all the documents, they will pay off the remaining loan amount to your old lender.

Repay your new loan at lower EMI: Since the new process has been completed, you can pay your loan EMI which will be low and save more money.

Simply put, a home loan balance transfer is the process of transferring your unpaid balance of your existing loan from one lending institution to another. You can avail of a home loan balance transfer offer only after you have a track record of repaying your home loan for a minimum of 12 months. By transferring your home loan, you can not only save up money that goes towards the repayment of your credit, it may also be availed of if another lender is offering you better repayment terms and services.

Here are some compelling reasons to avail of a home loan balance transfer:

Lower rate of interest- A lender different from your existing one is offering an attractive rate of interest. The difference in the rate of interest  ranges from 0.25-1% and brings down your EMI amount or loan tenure considerably. The rate of interest for a balance transfer on a home loan is currently hovering around 8.5-9%.

Better facilities and services– A home loan balance transfer can be considered if the new lender is offering better facilities such as higher number of bullet prepayments or prepayments in bulk amount as and when it is convenient. The new lender may also offer other facilities such as a higher top up loan, in case you are in sudden need of funds.

No hidden charges– A home loan balance transfer will only make sense if the new lender does not charge you anything apart from a nominal processing fee.

The process of a balance transfer

Although there are a plethora of lending institutions offering a balance transfer facility of home loans, the process of getting one is almost as elaborate as taking a home loan for the first time. Here are the steps you will need to go through if you are considering a balance transfer.

Submission of identity and income proof

Your new lender will require you to submit your identity and income proof, so you will have to be prepared with the documentation.

Your property papers

Finally, you will have to make an application to your existing bank to release the property papers that they hold after the transfer of the balance amount of your home loan. The new bank carries out its own technical and legal evaluation of your property as per standard rules and keeps a record of same.

In conclusion, it is fair to say that you must do a cost benefit analysis before you consider a balance transfer of your home loan. Consider all the fees and other charges you will pay against the amount of money you will save. Also bear in mind that the transfer cost has to be borne immediately whereas the savings will be spread over a longer tenure. If you still feel that a home loan balance transfer will be beneficial to you in more ways than one, we at #RuLoans will be happy to provide you all the assistance you need.