Personal balance transfer of loans is a method by which the borrower transfers the entire outstanding personal loan amount from one institution to another. This usually happens when the a bank lowers the interest rate (than the existing bank) on the due loan amount. The aim is to reduce interest rates.
Your cash flow may be limited when an emergency strikes at any particular time. In such a case of desperation for money, you may take a personal loan at a higher rate.
Once the immediate need for money is sorted, you can transfer the loan to another bank (offering a lower interest rate on the due loan) to reduce your EMI, to reduce the interest burden.
Some documents are needed for a personal loan balance transfer. The loan agreement (if Required) will incur foreclosure charges, processing fees and stamp duty at a normal expense.
In a personal loan transfer from one bank to another, your new bank pays off your existing loan. If your current loan comes with a prepayment clause, you may have to take that charge in such a case. Alternatively, you may have to pay a processing fee for your new loan. However, having a new loan will increase your savings and offset these costs with a lower interest rate.
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