Home loan balance transfer is an excellent option for borrowers as it allows them to take advantage of the lower interest rate options offered by another lender. However, transferring home loan can be a complicated process if some of the most important factors are not taken into consideration beforehand. Five things that you should definitely check before transferring home loan are discussed in this post.
Home loan balance transfer is the process which allows a borrower to transfer the balance home loan amount into another bank or NBFC, like LIC HFL home loan. Borrowers usually opt for this when the other lender is offering home loan at a lower interest rate or offers better services.
While a home loan transfer process might look like a simple process, there are a few important factors that should be taken into consideration to avoid making a long decision as the stakes involved are much higher.
While new lender would try to attract borrowers by offering reduced EMI and longer repaying duration, it is important to calculate the total amount that you would pay until the loan is completely repaid. Compare the total outflow between your current and new lender before making the decision. If larger EMI with the current lender is your problem, try to re-negotiate the terms and the lender would most probably help you out.
Check the Processing Fee and Other Additional Charges
You’d be required to pay a processing fee, legal charges, stamp duty, technical charges, valuation fee, etc. to the new lender for transferring the home loan. Calculate these additional charges and compare it with the amount that you can save with the reduced interest rate of the new lender. Only switch to the new lender if the savings are substantial.
Check the Ratio between Outstanding and Collateral
Borrowers who have repaid a considerable amount to the current lender should not offer original collateral to the new lender. Giving a security which is of far greater value than the value of the loan is not a financially sound decision. You can use the collateral for taking another loan instead. Offer a collateral of lesser amount to the new lender and if at all, the lender insists on same collateral, try to negotiate the interest rate further.
Terms and Conditions
Before signing the loan agreement, make sure that you thoroughly read the terms and conditions of both the lenders. There are banks which require the borrower to buy insurance from a particular company, deposit money in FDs with them, open savings account, etc. Read the agreement and understand the advantages and disadvantages before making the decision of transferring home loan.
Do not fall for the additional frills, like personal insurance, free credit card, etc. which a lot of lenders offer. These are just ways to attract borrowers and can prove very expensive in the long run. If you are looking to transfer the home loan, choose a reliable lender like LIC HFL home loan.
Look out for the above-mentioned things before opting for a balance transfer and you’ll protect yourself from making a wrong decision.