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Dos and Don’ts of a Home Loan Transfer


If you have ever taken a Home Loan, you know it takes up a huge portion of your earnings. The repayment takes up many years—often up to 20 years or more. This is proof enough that the deciding factor for a loan is the interest rate.


Some borrowers are already stuck with Home Loans that have a higher interest rate. In such a scenario, a Home Loan balance transfer may be advisable. With this, you can transfer your balance and pay off the loan at a lower interest rate. Is this a feasible option? Here are some do and don’ts that will help you decide.

The dos of a Home Loan transfer

  1. Carry out a cost-benefit analysis:
Suppose there are only a few years left for you to repay the loan. Or, it might be that the outstanding loan amount is low. In such cases, a balance transfer may not be as helpful. There are many costs involved in the balance transfer. It may not be beneficial for you.

  1. Opt for a transfer in the early periods of your loan:
You will save a larger amount when you transfer a loan during the early years. Even with a 50-basis point reduction, you will save a lot on interest payments for the original loan.

  1. Make sure you have a good credit score:
If you are applying for a loan transfer, the new lender will carry out a credit check. If they don’t find you creditworthy, they may refuse the transfer. So, ensure that you have built your credit. Check that your credit score is good enough.

  1. Prefer a transfer if you want a longer tenure:
Do opt for a Home Loan transfer if you want to extend your tenor but your current lender doesn’t allow it. You can shift the loan to a lender who is ready to offer you a longer tenor.

  1. Go for a transfer when you need a top-up loan:
Your current lender’s policies may prevent you from being eligible for a top-up loan. In this scenario, you can opt for a Home Loan transfer. 

  1. Transfer if you want better services:
Suppose your current lender does not give you good service. They may be unresponsive and non-communicative in cases of delay. Consider a balance transfer to a lender who has better customer support and services.

The don’ts of a Home Loan transfer
     
1.      Be in a hurry to transfer the loan:
A loan transfer needs careful consideration of the total charges involved. Do not be in a hurry to transfer the loan. You may end up paying more.
2.      Stick to one lender:
You may have to look around a lot. Shop for an interest rate that works for you. If your current lender agrees to change the rate, take them up on their offer.
3.      Skip the groundwork:
You are in for a bit of work when opting for a loan transfer. Don’t forget to shop around, compare, clarify, and negotiate the rates. This can save you a lot of money. Also, calculate the costs involved. Compare them to the older loan. You need to do the groundwork before you decide.
4.      Overlook the key factors:
The choice of a balance transfer depends on several factors. Your outstanding balance and the difference in interest rates matter. The remaining tenor is a key element. Also, take into account the processing time for the transfer. Do not overlook these key factors.
5.      Forget that the transfer takes time:
Getting a Home Loan transfer is similar to availing a Home Loan. The procedure takes the same amount of time. There is documentation, verification, field investigation, and evaluation. Be prepared to put in that same time.

Well, these are the necessary facts that you should know about Home Loan balance transfer. Weigh the pros and cons of a Home Loan balance transfer before taking the plunge. Like most financial decisions, it will take research and careful consideration.

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