Sometimes home loan transfer becomes a necessity due to higher interest rates or when you are looking for better services and customer support. It is seen people often avoid loan transfer unless and until it is too difficult for them to continue with the old loan. However, opting for a home loan transfer, also known as balance transfer or refinancing, can be beneficial under certain circumstances for home loan borrowers.
It is important for you to understand when is the right time for you to opt for your home loan transfer. Should you consider just the interest rate as a factor or there are other circumstances as well which can make you consider this decision.
Here are some situations when a borrower may consider a loan transfer.
Lower Interest Rates
If the prevailing market interest rates are lower than the interest rate on your current home loan, a loan transfer can help you switch to a new lender offering a lower interest rate. By doing so, you can reduce your EMIs and overall interest burden, potentially saving a significant amount over the loan tenure.
Better Terms and Conditions
Besides lower interest rates, a loan transfer may allow you to avail better terms and conditions, such as flexible repayment options, reduced processing fees, or improved customer service. It’s essential to compare the overall benefits and costs associated with the new loan.
Change in Credit Score
If your credit score has improved since you took the original loan, you may be eligible for a better interest rate from another lender. A higher credit score reflects improved creditworthiness and can be leveraged for more favourable loan terms.
Adhil Shetty, CEO, Bankbazaar.com, says, “It’s important to keep an eye on your credit score, as it can greatly impact your ability to secure loans or transfer existing loans at favourable interest rates. A score of 750 or above is considered excellent and can greatly increase your chances of being approved for loans with lower interest rates. Experts recommend checking your credit score at least once a month to ensure that you are aware of any changes that may occur. If you notice that your credit score has improved, it may be a good time to consider transferring your loan to take advantage of better rates.”
Top-up Loan Requirement
If you need additional funds for home improvements, education, or any other purpose, some lenders offer top-up loans along with the home loan transfer. This can be a cost-effective way to access additional funds.
Prepayment Penalty Waiver
Some lenders charge a prepayment penalty for repaying the home loan before its maturity. When you opt for a loan transfer, the new lender may offer to waive or reimburse the prepayment penalty, making it more attractive to switch.
Improved Services or Features
If your current lender lacks essential services or features, such as online account management, part-payment options, or foreclosure flexibility, a loan transfer to a lender offering these facilities can be advantageous.
Financial Institution Merger
In the event of a merger or acquisition of your existing lender with another financial institution, the terms and conditions of your loan might change. Transferring to another lender can help you maintain your preferred loan terms.
Service Issues with Current Lender
If you face disputes or issues with your current lender, transferring the loan to a different lender may help resolve those concerns. However, before opting for a loan transfer, carefully consider the associated costs and fees, such as processing fees, legal charges, and documentation expenses. Additionally, factor in the time and effort required for the transfer process.
It is essential to compare the terms and offers from various lenders to ensure that the loan transfer truly benefits you in the long run.