In the list of financial goals, buying a house is usually at the top for many people. However, the exorbitant real estate prices often make this goal a distant dream. This is where home loans are a great help. With housing loans, it is easy to finance a house property without exhausting the savings. However, interest rates keep fluctuating and so; it is not uncommon for home loan interest rates to drop while you are already servicing one loan. At such times, you might feel that you are paying much more than your contemporaries. Thankfully, there is a better solution – home loan balance transfer. Find out the details below.
What Is a Home Loan Balance Transfer?
If you have paid your loan EMIs timely, lenders allow you to switch your loan to another lender. This transfer of loan from one lender to another is called a home loan balance transfer. In balance transfer, you have to foreclose the loan with the old lender. The new lender pays the outstanding balance to the existing lender. You then have to pay the remaining EMIs to the new lender. You can transfer the loan if you feel that you are paying a higher interest rate and there is another lender who is offering a lower interest rate.
How Can Balance Transfer Help You?
Help you get lower interest rates
Reserve Bank of India’s benchmark rate on which your loan interest is based, keeps fluctuating. This means that there could be a drop in the home loan interest rates during the tenure. With a balance transfer, you can avail a fresh loan with lower interest rates and save money.
Help you enjoy better features
If you have a good repayment record and a high credit score, you can negotiate with the lender for better terms and conditions for the new loan. You could get facilities like top-up loans and overdraft facilities. A top-up loan facility can help you fund your other needs while servicing the loan. You can also enjoy benefits like better customer services, lower EMIs, etc.
If you have high eligibility and a good repayment record, you can restructure your loan with a balance transfer. You can switch from floating interest rate to fixed interest rate and vice versa. Similarly, you can also change your tenure as per the needs. If you face a financial crunch, you can extend the loan tenure to repay the loan EMI comfortably or shorten the loan tenure to close the loan faster.
To sum up
It could be frustrating to pay higher EMIs while the home loan interest rates have dropped. A loan balance transfer is an easy solution to stop doing that. However, while you opt for balance transfer, ensure that you are saving on interest outgo by doing a cost-benefit analysis. For best results, use a home loan EMI calculator and then proceed with the application.