Disbursing a Home Loan to the prospective homeowners has turned out to be one of the major sources of business for all major banking institutions. They vie for the attention of all prospects by offering extremely lucrative rate of interest along with several add-ons such as Motor Insurance, Life Insurance to Credit Cards at a minimum to nil charges. This is known as divesting a portfolio or branching in today’s business environment which many businesses do in order to stay ahead in the market and to leverage alternative sources of income.
Bank Loan Transfers have also been introduced by all major banks which enable the borrower of the Home Loans to switch banks and pay the remaining principal loan amount at comparatively lower interest rates than before. This is an extremely lucrative aspect which can be leveraged by the borrower as it might offer him/her a chance to save some money and in the process be a beneficiary to several of the benefits offered as add-on services by the new bank.
To avail Bank Loan Transfers, one must fill out an application form along with the proof of necessary calculations on savings on Top-Ups and the Balance Transfer. This will be processed by the new bank or financial institution and will ultimately lead to lower monthly repayment amounts and better services.
Though this process appears quite simple on the surface, it involves a lot of intricacies, which act as hurdles in availing the Bank Loan Transfer. To make it easier for you to navigate through these roadblocks, we have prepared a list of obstacles that you might face while going through this process.
When you Apply for Home Loan Balance Transfer, the bank in question almost always takes a very cautious approach and will give out a flurry of application forms to fill along with an extensive list of documents which are to be furnished. After getting through this phase comes the part where through scrutiny happens after which the process is complicated. Hence it is always suggested that prior to going on-board with a particular bank for a loan transfer, you should thoroughly weigh the pros and cons of making a switch.
The bank depending on its bandwidth will sometimes reject your loan application as no real advantage is going to be leveraged by the bank. The borrower might get a better rate of interest, but no transfer of ownership to the bank happens, which might seem inconsequential to the bank in question.
As discussed in the first point, along with the tedious paperwork involved, the banks might charge you a fresh processing fee which will vary from banks to banks. Before signing on the dotted lines, make sure that your savings support that fee which will be incurred. If the savings are not considered after switching it makes absolutely no sense going through this hard work again and again.
In some rare cases, the bank which is ultimately losing one of its customers might try to create some obstacles to delay your departure. This can especially affect your plans since it is mandatory for you to obtain a no objection certificate from the previous bank.
Make sure you check with the new bank, whether co-borrower approval is required to switch the bank loan. In some of them, the co-borrower might be staying in some other city or country, in which case he/she won’t be able to attend to the formalities that might require both parties.
Additionally as discussed previously, since the new lender will treat you as a new customer, you will have to follow their procedures all over again. The new bank will consider your CIBIL scores, repayment history, other loans availed, location, the age of the applicant and the tenure required, etc.
Since the benefits clearly outweigh the disadvantages, many borrowers are increasingly switching their Home Loan
to more cost effective and less interest charging banking institutions. It is also important that you time this jump at the precise time since most of the banks have a yearly cycle to change their interest rates. Financial experts suggest that the borrower should carefully assess all of his options and then jump into the conclusion at around the end of April or the beginning of May at that particular year.
Also make sure that the new terms and conditions being offered by the new bank are favourable in terms of allowing prepayments, foreclosure and minimum penalties as and if any delay in payment happens due to any unforeseen circumstances.
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