Do you know what’s similar in them now?

The entire loan EMI’s are going to get costlier after NBFC increasing their interest rates. Yes, with this news, nothing would be cheap anymore and hence it is obvious the common man in India will suffer. Their savings will take a hit and maintaining a budget will get tougher.

What can they do?

Taking a personal loan as example, since we know it is a short term loan, you will only have to pay loan EMI’s until a maximum of 7 years*. But with such news, taking a personal loan balance transfer can help you reduce your entire burden.

How can my burden be reduced?

A personal loan balance transfer takes place after you move your loan from the existing lender to the new lender. Your burden can be reduced because of these three benefits;

Tenure gets reduced:

Once you move your loan to a new lender, you can renegotiate on the remaining tenure and reduce it. Doing this will help you finish the loan repayment quickly and you will be debt free earlier than ever.

Interest rate is lower:

The most obvious point is having a lower interest rate. That’s the highlight of why you would switch from your old lender to a new one. If you are paying a lower EMI you can increase your savings. But beware! Before you could take this call, please calculate if shifting this short term loan will save you money or cost you more as there are many costs involved in shifting the loan.

Better terms and conditions:

In case you have a better credit score, you can renegotiate for better terms and lower down the interest rate even more. You can also look for better terms and conditions from the new lender which was not present with the old lender.

Hence a personal loan balance transfer can help you consolidate debts and reduce your burden. Save money and make the smart choice. To help you along with the process, you can visit Ruloans and compare options and quotes of different Banks. Get the best deal today via Ruloans.

But the party could not last forever. Soon, she had maxed out her credit cards and she found herself in a position where she couldn’t handle the debt pile she had accumulated and could do with a lower Emi outgo. A friend of hers then suggested that she opt for a balance transfer of her personal loan. But does hopping from one lender to another really help? Let’s take a closer look at the pros and cons of a personal loan to find out:

How a balance transfer can help:

Lower rate of interest

The first reason to consider a balance transfer is to reduce your interest rate burden. For instance, in Natasha’s case who had taken a loan at an interest rate of 15% two years ago. Her EMI amount is ₹11,895 and she has made regular repayments for the past two years. The remaining amount on her personal loan is ₹3,36,000 and Natasha made a balance transfer for this amount for a period of five years. The new rate of  interest she was offered was 12.99% and new personal loan EMI worked out to be ₹7,643 which has freed up her cash flow to be redirected towards the repayment of her credit card outstanding and other monthly expenses.

Reduces loan tenure

Though Natasha did not lower her loan tenure as she made a balance transfer, because she had cash flow constraints, you can choose to lower the tenure of your personal loan as you make a balance transfer. By lowering your loan tenure, you can be debt free in a shorter period of time.

Debt consolidation

If you are feeling bogged down because you have to keep track of multiple lines of credit, you can consider a balance transfer that will roll up and make a onetime repayment of your other outstanding debt. By doing so, you will not only have a better grip on your debt repayment schedule, you will have also improved your credit score in the process.

Not all is rosy about a balance transfer

High processing fee

Although you may be calling it a balance transfer of your personal loan, for a lender you are transferring the loan to, it will be considered a fresh line of credit. Therefore, you will be charged a processing fee on your outstanding amount which may be anything between 1.5-2% of the outstanding amount. Taking the processing fee into consideration along with new rate of interest the difference in your EMI may not be a big one.

You may be locked in for a longer while

Natasha, as mentioned earlier, made a balance transfer for five years. This meant that in effect she will be in debt for seven years (as she had made repayments for the last two years to her previous lender) instead of five as she had originally planned. Therefore, unless you are desperate to free up cash in the short run, a balance transfer may not be the best idea.

In conclusion, here are the things you must do before you consider a balance transfer of your personal loan:

• Do the math to find out whether there is a substantial interest rate advantage in a balance transfer. Use an EMI calculator to find out whether making a transfer is proving to be an advantageous proposition.
• Negotiate the processing fee with the new lender and see if it can be waived off
• Avoid getting into a debt trap by making regular repayments on your existing credit lines.

However, if you do arrive at a conclusion that a balance transfer is an answer to your debt situation at hand, do reach out to us at RuLoans. We are happy help to help you with all your credit needs.