Home loan interest rates like any other rates whether on deposits or other loans are flexible and change with market conditions. Thus it is not likely but almost sure that home loan rates change over the tenure of your loan. They may rise and you may thank your stars that you took a loan at the opportune time. They may fall and you may be dismayed at the fact that you are paying a higher interest rate. However there is an option which all home loan borrowers have. This option allows them to take advantage of a lower rate; and is known as home loan balance transfer. When using this option, the full unpaid principal loan amount is transferred to another lender. The lender which gives the loan pays the balance principal amount due, to the original bank which extended the loan and the customer will pay the EMIs to the new bank at the its new rate.
Ashish availed a home loan in the year 2012 at 11.75%. He came across an advertorial in which informed him that SBI home loans was offering a limited period offer for loan balance transfer; the loans would be available at 9.55%.. Though Ashish was tempted to just apply for a balance transfer he was advised to give it a careful thought before making a decision.
Make a Cost Benefit Analysis:
While it is pretty obvious that a borrower will transfer a loan only if it helps him/her save money but often by concentrating just at the difference in interest rates we may miss out on the bigger picture. Comparing overall savings with the cost incurred will help you decide whether you should make the transfer or not.
Credit Rating is also Important:
As we said earlier; a balance transfer is almost like taking a fresh loan so like in the case of a normal loan your CIBIL rating plays an important part in the process. The lender taking up your loan will make an inquiry into your credit health before they decide whether to accept your loan balance transfer request or not. Thus before seeking a balance transfer do have a look at your credit rating and see if it is good or not and will it be acceptable to the lender. If at the time of applying for a loan it was good but now it is not so or the guidelines have changed, then you may find it difficult to get a loan transfer due to a low score.
Talk to the Existing Lender: Before you approach another bank the most sensible thing to do is to talk to the existing lender. If the rates have softened then it is likely that the lender may be willing to consider lowering the interest rates. This may be true especially so if you have been a responsible borrower and have paid your dues on time. No lender wants to lose their customers so they will be willing to do so if conditions warrant. It is simpler for the borrower too as lesser hassles; no costs to bear and the existing lender will already have all the documents.
So just like Ashish gave his decision careful thought you make sure to do the same if you are considering to make a home loan transfer and make an informed choice.
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