Can I Transfer My Personal Loan to Another Bank to Get a Low-Interest Rate?

Updated on: 18 Jan 2024 // 4 min read // Personal Loans
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Unsecured Personal Loans offer an excellent mode of finance when you are in urgent needs of funds and do not want to exhaust all your savings. Personal Loans enable you to manage the crisis at hand effectively, and you conveniently make the repayment towards the loan amount through EMIs (Equated Monthly Instalments). Due to the uncertain financial environment at present, the demand for Personal Loans is at an all-time high.

What are Personal Loans?

Personal Loans are an unsecured form of a loan which is offered by most of the lenders in India. Being unsecured, they offer you the flexibility of not furnishing any security. As a result, the requirement for the documentation decreases significantly, and the loan applications are approved by the lenders in quick time. Unsecured Personal Loans can be used by you for any purpose that you want and there is no need for you to inform the lender regarding the actual usage of money. The personal loan interest rates start from 10.99% and the repayment tenure can be between 12-60 months.

Due to the rapid integration of technology in the lending sector, most lenders now encourage applicants to file an online personal loan application. This ensures speedy approvals, and in most cases, the applications are processed, and the amount is credited in your account within 24 hours itself. The online loan application feature makes Personal Loans an ideal option in case of a financial emergency.

Personal Loan Balance Transfer

Like every other loan, Personal Loans also come with a rate of interest that varies across lenders. Due to extreme competition in the sector, the variation in the rate of interest amongst lenders is vast, with interest rates ranging from 10.99% to 20%. If you have taken a Personal Loan at a higher rate of interest a few months ago and have been repaying the EMIs on time, then the chances are that you must have seen or received offers from various other lenders offering you significantly lower rates of interest.

As Personal Loan amounts go up to 50 Lakhs, a slight reduction in the interest rate can mean huge savings for you on account of interest cost. It also would help significantly in the reduction of your monthly instalment amount and enable you to repay the loan before completion of the tenure. The answer to your question “Can I Transfer my Personal Loan to another bank to get low-interest rate?” is, Yes. Yes, you can transfer your Personal Loan to another lender to reduce the rate of interest on the loan.

Factors to Consider Before Opting for a Personal Loan Balance Transfer

When you opt for a balance transfer of your existing Personal Loan to a lower interest offering, there are several benefits that you can enjoy. But before taking a final decision, there are various important factors that you must consider:

Savings on Interest

In order to ensure that you are able to have substantial savings on the interest expenses, the difference in the interest rates should be atleast 2%. Also, if you have paid a large part of the total EMIs, then balance transfer might not suit you, as you have already repaid a large part of the interest component.

Processing Fees

You have to take into consideration the various fees and charges being levied by both the lenders. You must check the total charges being levied by your existing lender such as closure charges, processing charges, and so on, as well as the charges being levied by the new lender such as processing fees, legal and technical fees, filing charges, and so forth. Compare the total savings that would be realised with the cost to be incurred. Take the decision for Personal Loan balance transfer only if the savings are substantial.

Better Services

If you are not satisfied with the services extended by your existing lender, then you can choose to transfer your Personal Loan amount. But, before selecting a new lender, you should conduct thorough research to ensure that the level of service and their financial charges are as per your satisfaction.

Terms and Conditions

In order to experience a hassle-free Personal Loan balance transfer, you must make sure that you have read all the terms and conditions carefully. There should be no ambiguity in the new loan agreement that you would be signing. Take care to collect all your documents from your existing lender and submit them to your new lender.

Additional Benefits

When you opt for a balance transfer of Personal Loan, you can negotiate with your new lender to get specific rewards and benefits such as Credit Card or free insurance. This can actually help you save a lot of money and maximize the benefits you can avail from the Personal Loan balance transfer.

If you are getting an offer of lower interest rates on Personal Loans from another lender, then you shall opt for it after considering all aspects of the proposal. Most lenders allow the option of Personal Loan balance transfer without any additional charges. Do not rush into the decision as there are significant costs associated with Personal Loan balance transfer and if you take a hasty decision, then the benefits accrued will be far less than the costs incurred.