Personal Loan Balance Transfer

Are you unhappy with the interest rates and terms of your current personal loan? If yes, you might find this guide informative. A personal loan balance transfer is a facility that enables you to switch your unfavourable loan to a better one with a new lender. Typically, transferring your existing loan can lead to a lower interest rate and longer tenure, which helps reduce your EMI amount and save more on interest payments. However, before making any decision, it's important to be aware of certain aspects. These include the eligibility criteria, required documents, applicable fees, and other relevant details about personal loan transfers. Continue scrolling down to learn more.

Interest Rates for Personal Loan Balance Transfer 

Interest rates for personal loan balance transfers vary depending on the lender, loan amount, loan tenure, and the borrower's credit profile. However, you can generally expect a slightly lower interest rate compared to the rate of your existing loan. More precisely, the interest rate for a personal loan transfer may fall somewhere between 10.49% p.a. and 24% p.a. 

Comparison of Top Banks’ Offers for Personal Loan Balance Transfer

Let’s take a closer look at a list of leading Banks/NBFCs and their offers for personal loan balance transfer:

Bank Interest Rate Processing Fee Tenure
HDFC Bank 10.50% p.a. onwards  1% of the loan amount  5 years 
ICICI Bank 11.25% p.a. onwards  Up to 2% of the loan amount  6 years
Axis Bank 10.49% p.a. onwards  Up to 2% of the loan amount  5 years 
Kotak Mahindra Bank 10.99% p.a. onwards  Up to 3% of the loan amount  5 years 
IDFC First Bank 10.75% p.a. onwards  Up to 3.5% of the loan amount  7 years
Tata Capital 10.99% p.a. onwards  Up to 5.5% of the loan amount 7 years
Bajaj Finserv 11% p.a. onwards  Up to 3.93% of the loan amount  8 years 

Fees and Other Charges

Let’s examine the applicable fees and other charges associated with personal loan transfer: 

  • Foreclosure Charges: When you close a loan before the tenure ends, your existing lender may levy a fee in the name of Foreclosure Charges. It typically ranges from 0% to 5% of the foreclosure amount.
  • Processing Fees: When you transfer your existing loan to another lender, the new lender may levy a fee to process your loan application. It typically ranges from 1% to 5.5% of the loan amount.
  • Stamp Duty: This is the tax that you have to pay to the government for registering your loan agreement with the new lender. It may differ from state to state, but it is usually a nominal amount.

Benefits & Features of Personal Loan Balance Transfer

Here are the expected benefits and features of a balance transfer personal loan: 

  • Lower interest rate
  • Longer loan tenure
  • Possible for a top-up loan
  • Better term

Eligibility Criteria

Here are the eligibility criteria you may required to meet for a personal loan balance transfer: 

  • You must be aged between 21 and 60 years old.
  • You must have a stable source of income that covers the loan EMI. 
  • You must have an existing personal loan with another lender and should have paid a minimum of 12 EMIs.
  • You must have a good credit score and a positive repayment history. 
  • You must be an Indian citizen. 

Documents Required

Here are the required documents you may need to submit for personal loan transfer: 

  • Identity Proof: Aadhaar, PAN card, or voter’s ID.
  • Address Proof: Utility bills, passport, ration card, or driver's licence.
  • Income Proof: Bank statement for the last 1 year, and salary slip for the last 2 months.  
  • Foreclosure Statement: A document showing that your current personal loan has been fully paid.

Why Go For a Balance Transfer on Your Loan?

Let’s take a look at a list of major reasons why you may need to opt for a personal loan balance transfer: 

  • As you consistently pay your existing EMIs on time, thereby increasing your credit score, you may now be more easily eligible for a lower interest rate than before.
  • Now that you may have become more financially stable and your income might have increased, you could be eligible for a loan with better terms than those you had previously.
  • When you first applied for your existing loan, the market conditions may not have been favourable. However, the current market might be more optimistic, with numerous lenders potentially competing to offer you better rates and terms.

Process of Balance Transfer of Personal Loan

Below are the expected processes you may encounter during a personal loan transfer from your current lender to the new lender:

  • Compare multiple offers and opt for the one that suits you best.  
  • Contact your existing lender and demand a No Objection Certificate (NOC) and a foreclosure letter. 
  • Submit your loan application form and other pertinent documents, such as your identity proof, address proof, income proof, etc., along with the NOC and foreclosure letter.
  • You may need to wait for a day or two for the verification process from the new lender. 
  • Once approved, the new lender will pay off your existing loan and issue a new loan agreement with the revised terms and conditions.

Frequently Asked Questions (FAQs)

Is a personal loan balance transfer a good idea?

A personal loan balance transfer is a good idea if you can find a lender that offers better rates and terms.

Can you do a balance transfer on a personal loan?

Yes, you can do a balance transfer on a personal loan as long as you are eligible.

Urban Money