When a borrower transfers his/her loan amount from the existing lender to a new financial institution, it is known as a loan against property balance transfer. Individuals can opt for this if they wish to reduce their repayment burden.
Although it makes loan repayments more affordable, certain factors must be taken into account before opting for this. Read to know them.
Top 5 things to know about a loan against property balance transfer
To avail maximum benefits of a loan against property balance transfer, one must remember the following things:
- Time of balance transfer
Timing plays a crucial role while opting for a loan against property balance transfer . Typically, borrowers at the end of their loan against property tenor must not opt for this. The reasons are simple for this. The charges and processing fees involved with this transfer will be more expensive than the ongoing repayment plan.
Similarly, it is not ideal to opt for this facility towards the beginning of the tenor since a major portion of the EMI goes as interest payment. Hence, it will only benefit one when opting for such a facility during the middle of the home loan.
- Interest rates provided by the new lender
The main reason why borrowers opt for a loan against property balance transfer is to reduce their existing interest burden and avail better servicing terms. However, to achieve this, individuals must choose a lender who charges a considerably lower interest rate on the current loan amount. To get a better idea, one can take the help of a loan against property EMI calculator available online to compute the instalments payable and the total borrowing cost.
Hence, applicants must do their research diligently and choose a lender keeping the above pointer in mind. This way, individuals can lower their monthly instalments and repay the loan quite comfortably.
- Credit score
Applicants must first check their credit scores to understand whether they qualify for the lender-specific loan against property eligibility criteria. Though the eligibility parameters vary with lenders, many lending institutions consider the following when sanctioning the balance transfer:
- 12 EMIs on their existing loan has to be paid
- There are no current dues on the loan
- The property is occupied or is ready to be occupied
- Terms and conditions
Individuals must find out about the terms and conditions of the new financial institution beforehand. This will help them know what to expect from the loan against property balance transfer. They should also enquire of the applicable loan against property tax benefits.
This should be followed by the documents required to apply for the balance transfer. For instance, in most cases, documents, such as Aadhaar card, income proof, and address proof are only needed.
- Charges involved
It is essential that individuals find out the charges involved with a loan against property balance transfer. This includes processing fee, application fee, administration fee etc. To save maximum, one should mandatorily settle with a lender offering nominal balance transfer charges. Knowing about these will help one make an informed decision.
Other than this, the existing borrowers may also levy charges for a balance transfer. This includes foreclosure fees, prepayment charges, penalty before approving the transfer. However, it is recommended that one avoid opting for this if the cost involved surpasses the current interest rate. In such a case, the entire purpose of the balance transfer is defeated.
Furthermore, pre-approved offers are extended by financial institutions for eligible customers. This facility allows individuals to skip the hassle of documentation and verification and avail a loan faster. It is possible due to the established relationship between the lender and a customer. These offers are applicable on various financial products, such as home loans, loans against property, etc. Borrowers can check their pre-approved offers online by entering their contact details.
Hence, borrowers must keep these following pointers in mind while availing a loan against property balance transfer. However, it is best to discuss with the lender and negotiate for a lower rate of interest if possible. This will also help one yield benefits from his/her current lender and manage the loan effectively.
Additional Read: How to Apply Online for Instant Personal Loan in Emergency?
