A balance transfer is one thing that has started to gain a lot of traction in the Indian financial market in the last few years. A balance transfer happens when you opt for a loan from a new lender and use that money to pay off your old loans. Borrowers often opt for a loan transfer if the interest rate on their current loan is too high and a new lender is offering them a new loan at a much lesser interest rate. You may also apply for a higher loan amount while opting for a loan transfer through an instant loan app.
However, loan transfers may not always be the best feasible option for you, considering all the fees associated with the process. There are certain situations in which a personal loan balance transfer can benefit you in many ways.
Read on to understand the different situations in which a personal loan balance transfer can be beneficial.
Situations in Which a Personal Loan Balance Transfer Can Be Beneficial
1. When you are getting a lower interest rate
This is the most common and logical reason to transfer your loan balance to a new lender. You can check out the instant loan apps that offer much better interest rates than conventional lenders on a quick loan. These apps may provide a balance transfer with zero processing fees and other attractive loan features. Fintech companies do not have as high operational costs as traditional lenders because they rely on advanced technology that helps lower their operating costs significantly. So, download an instant loan app to check out your offers.
2. When you want to reduce or increase the loan tenure
It is very important to realize that the loan tenure plays a very important role in your ability to repay the debt fully. Before changing your loan tenure, calculate fees, interest payouts, and EMI burden. A loan app allows you complete flexibility in terms of loan duration. If you think your current loan has been running too long, you can balance transfer for a shorter loan. If you need to take things easy, you can transfer the balance for a longer loan.
3. When you are unsatisfied with the services of your current lender
This is also a common reason people prefer to get a balance transfer done from one lender to another. You can opt for a balance transfer through an instant loan app and get a quick loan within minutes. Poor customer service was very common a few years back, but today, with the instant loan apps, the customer service level has increased significantly. From assisting you with the loan application to answering all your queries within minutes, the instant loan apps offer you 24/7 customer service. This is especially helpful if discrepancies occur with your loan account; you did not receive your NOC or other such instances. In addition, since there is almost zero human intervention in the loan process, the risk of human error with any aspect of the loan is also very low.
4. When you are looking to consolidate other debts
People often find themselves handling too many loans they availed of at different times. Having too many EMIs frequently creates a complex situation where you may miss an EMI if you are not tracking everything diligently. This will lead to unwanted and unnecessary fines. This is another case when a personal loan balance transfer can be useful. If you balance transfer all loans to just one, you do not have to worry about the tracking challenges. If you opt for auto-debit, just one EMI is automatically deducted from your account.
5. When you are looking to reduce monthly EMI outgo and save more money
This is a reason for people looking to save more every month. One quick way to save money every month without significantly impacting the overall monthly budget is to transfer the personal loan balance. If you move your unique loan balance to a quick loan app, you will see that your EMI goes down because of the lower interest rate. As a result, you can take the difference between your old and new EMI amount and save that in a monthly deposit. Simply a balance transfer gets you started on your savings journey.
6. When you are preparing to take a big-ticket loan
This is common for people building their credit score or looking to get a big-ticket loan to buy a car or a home. Getting the balance transfer done to a quick loan app can benefit such people in many ways. First, it reduces their debt-to-income ratio and frees their income for more new loans. Second, it also helps by consolidating multiple EMIs and boosting their credit score as many loans get repaid in one fell swoop.
7. When you have an impending decline in income
In times of economic uncertainty, you should be very careful with allocating your income. The pandemic and uncertain economic times that followed have been problematic for many people. The age of unchecked spending is on the wane for many people as various industries will look to cut the wage bill. If you suspect you may also look at such a situation shortly, you may want to transfer the balance to an instant loan app. Moving the balance to an app will allow you to save more money now and be ready if your income is impacted.
Conclusion
Always remember that balance transfer is to be used carefully and more disciplined. Please do not use a balance transfer to continuously move your debt from one lender to another. It will again create a negative reputation and impact your future loan eligibility. Also, make sure to consider all the aspects of a loan transfer before opting for one. Read the terms and conditions of your new lender and try to negotiate with your existing lender before you opt for a balance transfer.
