Taking home loans is a prolonged financial commitment! It needs to repay in several monthly instalments by taking up a significant amount of your income. Therefore, borrowers consider home loans a big concern. Here comes a great facility named home loan balance transfer to decrease the interest rate and subsequently eliminate borrowers from such difficult situations.
Lenders provide this offer to borrowers who find it difficult to repay the total owed amount.
In this scheme, the unpaid principal gets transferred to another lending organization to pay the dues at a low-interest rate. If you are likely to pay your EMI regularly, any bank or NBFC will help you avail of this scheme.
If you are thinking of transferring your loan to another lender, check on the following mistakes to prevent losing additional money.
1. Interest Type
Before applying for a balance transfer, check whether your current interest rate is fixed or variable. The variable interest rate might seem low, but it can change in the coming days. Whereas fixed interest rates might be higher, there will be no alteration to the market condition. Therefore, ensure getting acknowledged about the interest type and rate to not make any hasty decision on transferring your balance.
2. Interest Calculation
It's no use to pick out a balance transfer where the interest rate seems low, but the tenure is longer than usual. In this situation, you should avoid settling on such a balance transfer. Calculating the aggregate repayment amount and savings before transferring your balance to another lender is best. The lower interest rate might ease your financial worry, but the raised tenure will gradually raise the interest cost.
3. Additional Expenses
When you decide on a balance transfer for loans, you must consider the associated expenses like stamp duty expenses, balance transfer fees, processing charges, and other charges. Therefore by taking the balance transfer, you will weigh up your expenditure.
Even the fees of balance transfer also determine factors like income type. The charge of a salaried person might get differed from the businessperson. So, it's your responsibility to ask the lender about the detail of the charges before signing the agreement.
4. Authentication of Lender
Sometimes, lenders have great offerings like low rates of interest that let the customers be tempted. If you don't want to be counterfeited, read the given terms and conditions carefully. Different lenders have varying terms of service. Thus it would be best if you were careful. To know the lender's credentials, go through the online testimonials and reviews at the lender's official website.
5. Transferring Time
Most borrowers make a blunder by transferring the balance in the last remaining months of the loan tenure. Choosing balance transfer at the tenure's end will increase your financial burden. If you want maximum benefits from a balance transfer, opt for a loan transfer before the end of the first half of the term. This way, you can save on paying out additional interest costs.
A balance transfer is an ideal option to reduce your debt to the minimum. Check the fine print thoroughly before you agree to transfer your existing loan balances to the other lender. If you do not look out for the things mentioned above, you will end up financially harming yourself rather than supporting yourself.