Sometimes, managing an existing personal loan can be difficult. Which is why you might end up searching for ways to reduce the outstanding debt. One of the easiest ways to reduce the debt is by opting for a personal loan balance transfer. In simple terms, a personal loan balance transfer means transferring your current personal loan at a comparatively lower interest rate and with new terms and conditions. This way, you can significantly reduce your monthly EMIs. Again, most of you might be wondering how a loan balance transfer works? In this article, we will highlight all the important aspects of balance transfer facility and explain why it might be beneficial for you.
Benefits of Personal Loan Balance Transfer
Here are few reasons as to why a balance transfer is beneficial for you:
Reduction in Tenure
Depending on the terms of the Balance Transfer, you may get the same or a marginally reduced loan tenure. A reduced loan tenure is a good news for you as this means you would get debt free a few months earlier. It is a great relief if you have opted for a long-term repayment period while availing a personal loan.
Lower Interest rate
In case of stumbling under the pressure of a high amount EMI, transferring your existing loan to another financial institution at better interest rate can be your great help. However, a proper calculation regarding the entire transferring process should be done before you opt for it. Factors like loan tenure, processing fees and other charges should be noted down before you take the step.
Increase in Your Credit Score
Under the beneficial condition, a transfer of your existing balance to another institution can help in increasing your credit score by few points. You can increase your score by a few points since it will lead to more credit options for you in future. However, it will totally depend on your case and the new offer you are going to avail. Therefore, it is necessary that you should carry in-depth research regarding the new loan offer thoroughly to make sure that it is beneficial for you.
Things to Keep in Mind
A transfer of loan amount from existing to a new one will reset your lock-in period of the loan. Here, you would be bound to a new service provider for a certain period of time. So it is essential to know all the terms and conditions that would be levied upon you and compare them against your existing loan.
While you may cut down the interest rate by availing a low-interest personal loan offer, you have to pay the processing fee which is 1 to 2% of the loan amount depending on the service provider. Moreover, you also have to pay other charges as per the terms of the new loan.
Conclusion
Most of the financial experts believe that personal loan balance transfer is a beneficial move in the long term as it may improve your credit score and can help you make your finances better. In short, a balance transfer can be a good option if you save money and hence, you should weigh the pros and cons of the entire deal before you take the final stand.
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