In the last few years, various regulations under RBI prompted borrowers to make changes in their borrowing patterns for different advances. For instance, with financial institutions shifting their lending rates from base rate to MCLR, many borrowers want to shift to the latter regime to avail lower interest rates.
The loan against property balance transfer facility is one such feature that enables individuals to shift their outstanding loan amount from one financial lender to another to avail better interest rates and consequently pay lower EMIs. However, if you are looking to avail this facility, you should have comprehensive knowledge of advantages and disadvantages of doing the same.
Pros Of Availing Balance Transfer Facility
If you transfer the outstanding principal amount of your loan against property from one lender to another, you can avail the following benefits:
- Lower interest rates
If you compare the interest rates offered by different lenders in the market, you may come across a few that offer much lower interest than others. Thus, with loan balance transfer facility you can avail better mortgage interest rates that can make loan repayment easier for you.
Since the recent repo rate cuts announced by RBI affected the MCLR and consequently lowered interest rates offered by financial institutions by quite an extent, it is best to keep your eye on lending rates.
- Top up loan
Few financial institutions offer a top up loan amount over your outstanding loan against property amount to help you cover the additional expenses that might arise unanticipated. For instance, institutions like Bajaj Finserv offer a high-value Top Up Loan amount of up to Rs. 50 Lakh when you opt to transfer your loan balance amount.
The company also brings pre-approved offers that make availing loans faster and much easier. These offers are available on various financial products, including home loans, business loans, apply for personal loans online, etc. You can check your pre-approved offer by providing details like your name and phone number.
- Extended loan tenor
You may want to opt for a longer tenor to lower your EMIs. However, your current lender may not be entertaining such requests. In such cases, transferring the outstanding loan amount to another lender may help you to avail extended tenors, thus enabling you to set the EMI amount according to your convenience.
- Additional benefits
If you avail the loan transfer facility, you can also avail of additional advantages offered by the second lender. For instance, few financial institutions offer benefits like part-prepayment and foreclosure facilities, easy online account management features, etc. that can make the process of repaying the advance much easier.
Thus, while shifting from one lender to another, it is crucial to check the charges of your loan against property levied by the second lender. If the financial institution levies too many charges, you may end up paying more than you save from lower interest rates.
Cons of availing loan against property balance transfer
Consider these factors before you avail transfer your loan balance to another lender:
These are –
- Charges associated with the facility
The facility of transferring your outstanding loan amount comes with a transfer fee. So, before availing the facility it is crucial to check how much you are saving on your interest payment and compare it with the transfer fee. Otherwise, you might end up paying more.
- Check the features offered by the second lender
The interest rate is not the only thing you check in a financial institution while availing an advance. That is why, even though a lender might be offering lower interest rates, it might not offer additional benefits that come with availing the advance. So make sure you check the features of loan against the property of second lender before choosing to avail the facility.
Before you choose this loan balance transfer facility, make sure you read the fine print of availing the loan from the second lender.
Also, check factors like the loan against property eligibility criteria and list of documents needed to avail a loan against property to make sure there are no problems during the application process. With these few factors in mind, you can enjoy the benefits of this advantage without any hassle.