Top Benefits of Home Loan Balance Transfer: Save Money and Reduce EMI - Loan Trivia


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Monday 8 July 2024

Top Benefits of Home Loan Balance Transfer: Save Money and Reduce EMI

Home Loan borrowers constantly seek opportunities to optimise their loan terms and reduce their debt burden. One such option is a home loan balance transfer. Transferring an existing home loan to a new lender with better terms can save a substantial amount on the interest component of the loan especially if the interest rates are lower.

However, there are certain factors that one should keep in mind before going ahead with a balance transfer. One must have a proper understanding of the benefits of home loan balance transfer to make an informed decision. Interested borrowers can read along to get further insights about the same.

Advantages of home loan balance transfer 

Here are some of the benefits of home loan balance transfer:

  1. Lower interest rates: 

One of the primary reasons for opting for a home loan balance transfer is to take advantage of lower interest rates. Existing home loan borrowers seek the opportunity to reduce their debt burden by switching to a lender who is offering a lower interest rate as compared to the existing one resulting in savings in the long term.

  1. Reduced debt burden: 

A lower interest rate reduces the overall interest component of the loan, which can result in either lower EMIs or shorter loan tenor. It can vary from lender to lender, some may reduce the monthly instalments, some may shorten the loan tenor or some might even offer a choice to borrowers between the two.

  1. Saving potential: 

Home loan borrowers can save not only on interest but also on various fees and charges, such as pre-payment or foreclosure fees. Therefore, it's important to check with the lender regarding the fees, charges and other perks they offer before going for transferring an existing home loan. 

  1. Improved customer service: 

Switching lenders and conducting a balance transfer offers the borrower an opportunity to choose a lender with great customer service. This ensures more streamlined communication and support as and when required.

  1. Access to additional funds: 

It is also one of the important benefits of home loan balance transfer as many lending institutions offer a “top-up” option at the time of balance transfer. This simply means that the borrower can avail additional funds which can be utilised for various purposes such as funding children's education, home renovation etc.

  1. Debt Consolidation:

Home loan balance transfer can also help the borrower to consolidate all their debt under a single lending institution which makes it easy to manage and helps in streamlining overall finances. For instance, one might have an ongoing personal loan with a different lender, in such case the borrower can transfer his existing home loan under a single lending institution if they are offering a lower rate of interest.

Several lenders provide pre-approved offers on various types of products such as personal loans and home loans. Such types of pre-approved offers are available for a limited time and speed up the application process. But it is always recommended to thoroughly check each and every loan term along with balance transfer charges to make an informed decision.

To sum up, there are several benefits of home loan balance transfer which include lower interest rates, overall reduction of debt burden, savings on the interest component, access to additional funds and improved customer service. By adopting a suitable strategy and gaining a clear understanding of one’s financial circumstances, one can secure more funds at favourable terms and achieve substantial savings on the overall interest payments of the loan.

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