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Personal Loan Balance Transfer

Personal Loan Balance Transfer (PLBT) facility offered by lenders to existing personal loan borrowers of other bank and NBFCs to transfer their existing personal loan at lower interest rates.

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Just like a personal loan, PLBT does not require any collateral or security to be submitted with the new lender. The few nominal charges to be paid include the foreclosure charges and loan transferring charges to your existing lender. Your new lender may also charge the loan processing fees, along with stamp duty and other fees usually charged on making a fresh personal loan application.

Personal Loan Balance Transfer Interest Rates

The interest rates offered by the new lenders on exercising personal loan balance transfer would usually be lower than the personal loan interest rates charged by your existing lender. Personal loan interest rate offered by the new lender would also depend on your existing outstanding loan amount, loan tenure, credit score, income and other aspects of your credit profile.

Balance Transfer Processing Fees and Charges

You existing lender may charge foreclosure fee of up to 5% on the outstanding loan amount on transferring the personal loan to another, if the original personal loan was availed on fixed interest rates. Lenders would not charge any foreclosure fee in case of personal loans sanctioned on floating interest rates. The new lender will charge a processing fee from Rs. 500 to 4% of the outstanding loan amount during personal loan balance transfer.

Calculation of interest cost savings generated from Personal Loan Balance Transfer

The following table gives you an illustration of how a personal loan balance transfer could help you save on the total interest payable:

Original Loan Amount	Rs. 5 Lakh	Rs. 10 Lakh
Existing Rate of Interest	15% p.a.	15% p.a.
Original Repayment Tenure	60 months	60 months
EMI already paid	12	12
EMI to be paid	48 months	48 months
Existing EMI	Rs. 11,894	Rs. 23,789
Outstanding Loan Amount	Rs. 4,27,416	Rs. 8,54,819
New Rate of Interest	11.50% p.a.	11.50% p.a.
New Tenure	48 months	48 months
New EMI	11,150	22,301
Total Savings	Rs. 35,712	Rs. 71,424

Benefits and Features of Personal Loan Balance Transfer

Lower Rate of Interest: One of the primary objectives of exercising personal loan balance transfer is to avail lower interest rate and thereby, reduce one’s overall interest cost.
Longer Repayment Tenure: Exercising personal loan balance transfer facility can also help a borrower to opt for a longer tenure than the residual loan tenure of his existing personal loan. A longer tenure will reduce then his monthly EMI burden. However, this would lead to a higher interest cost for the borrower.
Avail Top-up Personal Loan: Many lenders offer top-up personal loans to those transferring their existing personal loans. Thus, personal loan balance transfer facility would benefit existing personal loan borrowers unable to avail top-up personal loans or being charged higher interest rates for it.

Eligibility for Personal Loan Balance Transfer

Below stated is the basic eligibility criteria for PLBT:

Age: Minimum 21 years and maximum 65 years
Salaried individuals and self-employed professionals
Existing outstanding loan amount should be at least Rs. 50,000 or defined by the lender
Clean repayment history
Work Experience: Usually 1 year of work experience is required with some lenders requiring longer work experience
Minimum Monthly Income: Rs. 15,000
CIBIL score: Usually 750 or above

Documents Required

Basic documents that the borrower may be required to submit in case he/she wishes to opt for a personal loan balance transfer are as follows:

Duly signed application form with passport size photographs
Identity Proof (PAN card/driving license/passport/voter ID/Aadhaar Card, etc.)
Age Proof (PAN card/driving license/passport/voter ID/Aadhaar Card, etc.)
PAN Card (Mandatory)
Address Proof (Aadhaar Card/Passport/ Landline Bill/ Latest Electricity bill/Rent agreement, etc.)

Additional documents specified to salaried and self-employed individuals are as follows:

For Salaried Individuals:

Last 6 months’ bank statement
Salary slip for last 3 months
Statement of personal loan from a current lender (for the loan that needs to be transferred)

For Self Employed Individuals:

Business PAN card
Business address and vintage proofs
Last 3 years’ Balance sheet along with profit and loss statement pertaining to business
Last 6 months’ bank statement of individual and business entity
Statement of personal loan from a current lender (details of the loan that need to be transferred)

Process of Personal Loan Balance Transfer

Personal loan balance transfer process usually involves the following steps:

Check the current interest rate that you can get on your personal loan with other lenders and calculate the interest savings.
Evaluate the estimated cost of the loan transfer taking into account various charges and fees that might be applicable.
Consider the net benefits and finalize whether you want to opt for the balance transfer or not. Shortlist a few lenders that you may want to transfer your existing loan to.
Compare the interest rates offered by the shortlisted lenders, your loan amount eligibility and their loan process.
After you finalize upon the new lender and decide to go ahead with the transfer, apply for a NOC (No Objection Certificate) and foreclosure letter from your existing lender.
Start the application process with the new lender. Submit the loan documents along with the complete record of repayments.
Get a sanction letter and execute the new loan agreement with the new lender.
Take a disbursement (of the outstanding loan amount that you had to pay to the previous lender) from the new lender through cheque/ demand draft in favour of the earlier lender.
Once the previous lender receives the outstanding loan amount, they will cancel all the cheques and ECS and close your personal loan account.

FAQs Personal Loan Balance Transfer

Who can avail the personal loan balance transfer facility?

Ans. Lenders offer this facility to existing personal loan borrowers of other lenders matching their loan eligibility criteria.

Does personal loan balance transfer affect credit score?

Ans. While exercising the personal loan balance transfer option, the new lender would fetch your credit report to check your creditworthiness. As such lender-initiated loan enquiries are considered as hard enquiries, credit bureaus will reduce credit score by a few points for each lender-initiated enquiry. Hence, opting for a personal loan balance transfer option might reduce your credit score by a few points. However, making personal loan balance transfer applications with multiple lenders within a short span can lead to steeper reduction in your credit score. Hence, instead of making direct loan transfer applications with multiple lenders, visit online financial marketplaces like Paisabazaar.com to evaluate various loan options. While such online financial marketplaces would also fetch your credit report, such fetches are considered as soft enquiries and do not impact your credit score.

What is the repayment tenure in case I opt for the balance transfer of my personal loan?

Ans. The repayment tenure can range between 12 to 60 months.

Can I avail myself more money by opting for a balance transfer?

Ans. Yes, several lenders offer customers the option to avail a top-up personal loan while exercising personal loan balance transfer. Top-up personal loan enables customers to borrow more money over and above their existing loan.

Do I need to submit any collateral or security while applying for a balance transfer?

Ans. No, you are not required to submit any collateral or security for applying for a balance transfer, as it is an unsecured loan and the same as personal loan.

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