Taking a personal loan balance transfer to consolidate your debts is considered as the most practical solution to pay-off that outstanding loan amount. But most borrowers are still not aware of the fact that they can save more money through refinancing their loans. When you take a personal loan balance transfer, it simply means that a borrower pays-off the old loan by taking a new one, ideally, with better interest rates and terms. Or in simple words, it’s another method of consolidating your holdings. The only difference being, debt consolidation means using a personal loan to pay off the debt, while when you get a personal loan balance transfer, you’d be only adding on to the existing loan. It can be viewed as sort of top-up loans as well.
There are several benefits associated with a personal balance transfer like-
–> Clear outstanding loan amount easily through consolidation of all the debts into one
–> Minimize the risk associated with the loans
–> It offers better terms and interest rates
–> Tackle a tough financial situation by offering low-interest rate
–> It enables a person to shift from a fixed interest rate to an adjustable interest rate or vice-versa.
You can apply for a personal loan balance transfer with your current lender or may go for the other one as well. It’s always advisable to look for the best offers, rather than shying away from the research part before going for a loan refinancing.
How can you get a personal loan balance transfer?
The process to get a personal loan balance transfer is rather simple. The process works much like refinancing a mortgage. You check for your personal loan balance transfer eligibility and simply apply for a loan with any bank or financial institution to cover the remaining amount on your current loan. Once your application is approved and the loan is disbursed, you can use the funds from the personal loan top up to pay off the previous loan at the lower interest rate.
Also, keep in mind that while refinancing you’d be carrying the same amount of debt, but your savings will be in large proportion due to better terms and reduced interest rates.
Things to consider while getting a personal loan balance transfer-
Going to get a personal loan balance transfer? There are certain things to consider-
Check Your Credit Report
This is a no-brainer, whether you’re applying for a credit card or want to refinance your loan, checking your credit report should be the foremost step on your to-do list. It’s important to check your credit report, as it’s an important tool to help manage your personal finances. There are several benefits associated with checking your credit report like you will always know your creditworthiness, you can improve your credit score if you see it dipping and can also report any errors in a timely fashion.
If you’re looking for a personal loan to refinance your debt, then you should have a good credit score. And you can improve it only by regularly keeping an eye on your credit report.
Your credit score greatly influences the interest rate that your respective bank or financial institutions offer. And if your score has seen a positive curve since your old loan then you would indeed be offered a low-interest rate. Therefore, keeping a close check on your credit report and making efforts to increase your credit scores are only going to help you in long-term.
Comparing Loan Options
Just like you won’t book a hotel before comparing its price with others. It’s important to compare the loan options too before going for refinancing. Banks and financial institutions offer different interest rates, offers, benefits etc. So it only makes sense to compare and analyze all the factors carefully before applying for the loan. Always look for the offers which suit you the best and is beneficial to you in the long-run. The main purpose of refinancing is to take a new at a lower interest rate and use it to pay off the old loan. If you don’t compare well, and still go for a personal loan with high-interest then the whole purpose of refinancing the loan goes in vain. So, it’s beneficial to check and fully compare the loan options.
Calculating Refinancing Cost
Before you approach some banks or lenders for refinancing, it’s important to calculate your refinancing cost. You can take the help of several refinancing costs available online. This will give you an idea on how refinancing works and what your cost that you’re incurring might be.
Refinancing a personal loan includes cost like fee etc. In some cases, these costs might be too high. And you land up paying higher rather than canceling out on your cost through a refinance. The costs that this includes are- application fees, processing fees, origination fees etc. Also, don’t forget to read the fine print before approaching your respective bank or lender.
Apply For The New Loan
When you have found the terms and interest rates most suitable to you, that will help save your money. And also enhance savings, it’s time to apply for the top up personal loan. You can look for several online portals available to apply for the loan. They will help you cut through the queue and reduce that extensive paperwork. Make sure to have all the important documents required to complete the process.
Related Article: Reduce Monthly EMIs Using Personal Loan Balance Transfer
Close Out Your Original Loan
Upon approval of your loan refinance application, your amount is disbursed. It’s time to close out that original loan as soon as possible. The main purpose of going for the refinance was closing out your old loan. So after you receive the amount try to close out the old loan.
It will take less time if you apply through online portals. Also, you won’t be going through much hassle in the process.
Should I Get A Personal Loan Balance Transfer?
The true value of a personal loan refinancing depends on several things. Generally, it includes your current financial standings and terms of the loan offered to you by the bank or lender. If you want to determine the true value of your loan refinancing. Then it’s important to consider what your current loans are offering you and how refinancing is beneficial to you. When you apply for a personal loan to refinance your holdings, the interest rate offered to you would be much lower than your previous loan.
Related Article: 7 Mistakes To Avoid In A Balance Transfer
So, we can say that a personal loan refinancing does help you save more on your loan amount by decreasing the interest rate. You can get a personal loan balance transfer to pay off that old debt if done right. We hope this article will help you to know more about refinance and its benefits.
