7 Mistakes to Avoid in a Loan Balance Transfer
There are a lot of people who mess up with their finances and one of the reasons why they do so is because of the lack of the right information at the right time. Every human being has dreams and aspirations, and those dreams push them to be better in their lives. Most of us dream of buying a fancy car or going on dream vacations with loved ones, but most of the time we tend to step back due to lack of money. In today’s world, money plays an important role. From buying daily essentials to buying big ticket items, money plays a crucial role in human life.
To ease these financial challenges, most households depend largely on bank loans and credit products. Home Loans, car loans, personal loans, and credit cards are some of the common type of loans availed by all at some point in time. Besides, additional products such as Top Up, Balance Transfer, and overdraft are equally popular among the users who know how to tap maximum out of the available credit offers.
Home Loan Balance Transfer is one of the common loan transfers used by the borrowers. It is generally used to tap lower rate of Interest on the running home loan. For example, when you choose to transfer your PNB Home Loan after 5 years to Kotak Mahindra Bank Home Loan Balance Transfer on lower rate of interest and reset tenure, according to your current repayment capacity, you are basically opting for Balance Transfer facility.
However, one must take care of certain important factors before transferring a loan balance. Here is the list of some of the common mistakes that one should avoid while transferring the loan amount.
1. Calculation of interest:
Many a times, people opt for Home Loan Balance Transfer for lower rate of interest, at a longer tenure. However, you must not transfer the loan amount without calculating the total effect of the loan transfer. Lower rate of interest will definitely come easy on your pocket, however when you raise the loan tenure, the total interest to be paid on the loan will also increase. So, it is important to calculate the total repayment amount before making the decision.
2. Credentials of the Lender:
Do not let only the attractive offer by a new lender lure you. Never sign the dotted line without researching the credentials of the lender. Different lenders have different policies with regards to the loan, and therefore, you should make a proper study about the lender. Study about the lender’s reputation in the market and make sure that your lender will not let you down if you transfer your loan. Read the testimonials and reviews on the Internet and also get acquainted with the terms and conditions offered.
3. Rate and Type of Interest:
Rate of Interest is the most common feature which one looks for while Applying for a Home Loan Balance Transfer. So, while you compare the rate of interest make sure you also compare the type of interest rate. Fixed rate of interest costs you more while the reducing rates of interest are lower, however, the latter may change in future as per the market fluctuations. Make sure you do a detailed study about the type and rate of interest your lender is providing you.
4. Processing Fees and other Charges:
Always consider all associated expenses such as BT fee, processing charges, expense of stamp paper, and other allied charges, before making the decision. Sometimes, the loan transfer chargers may depend on the type of income a person has; for example, a salaried person may be charged differently while a businessman might have a different charge. Asking the lender about the charges will help you know the real saving from the new loan.
5. Foreclosure Charges:
Foreclosure charges may also add to the cost of the loan. You must check on the foreclosure charge before proceeding to transfer the loan to a different lender.
6. Timing of BT Loan:
Most people make the mistake of transferring the previous loan during the last few months of the loan tenure. Transferring loans at the end will increase the burden of the loan. To avail the maximum benefits, you should transfer the loan within the first half of the loan tenure. Such Loan transfer will not be a burden on the consumer. If a person has already crossed half of his loan period then it is better to wait till the loan maturity or take a fresh loan.
7. Mortgage/ Collaterals:
Most of the banks and the financial intuitions seek collateral for a big-ticket loan. The collateral helps the bank to minimize its risk on loan repayment. Do not make a mistake of offering higher value collateral than the required loan amount. Make proper calculation and do not put your assets at charge for making a transfer.
All in all, financial decisions should not be carried out in a hurry. Things that involve a huge sum of money are often sensitive and therefore it should be followed with the utmost care. Transferring a loan haphazardly without making proper analysis may lead to excessive payment and increase of loan burden.
Loan transfer has its own advantages if it is used properly but one must be mindful while taking this step. We at MyMoneyMantra can help you make the right decisions.
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 70+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.
Talk to our Loan Specialists toll-free at 18001034004 to know more about our products and offers.