What is Loan Balance Transfer: Often people consider personal as the best option due to financial constraints. In such a situation, if you have also taken a personal loan and even after that you need money, then balance transfer will be very beneficial for you. Let us know its advantages and disadvantages through news.
If you have taken a personal loan from any bank and you need more money, then you can use Balance Transfer (BT). At the same time, if you are facing difficulty in paying the EMI of the first loan, you can still use balance transfer. With this you get some extra money in your hands. However, after balance transfer the EMI burden may increase.
Know- what is balance transfer
If you have taken a personal loan from one bank, you can apply for more loan from another bank. In most cases, the second bank offers a lower interest rate or a higher loan at the same interest rate than the first bank. Suppose you have taken a loan of Rs 5 lakh from a bank for 5 years. Its EMI is Rs 10 thousand. You paid some EMIs and later due to some reason you started facing difficulty in paying the EMIs.
In such a situation, you can talk about balance transfer from another bank. It is possible that another bank may offer you a loan of Rs 8 or 10 lakh. In such a situation, the second bank will ask you for details of the remaining amount of the first bank. The other bank will give you this remaining amount through DD and will transfer the remaining amount to your bank account. This process is called balance transfer i.e. BT. In this the old loan ends and a new loan starts.
Can also go for top-up
If you do not want to do BT then you can talk to the current bank and get top-up. In such a situation, your interest on the ongoing loan will remain the same but due to the higher amount, your EMI will increase. Suppose you took a loan of Rs 5 lakh from a bank. You keep paying its EMI on time for 2 years. After this you need more money. In such a situation, you can talk to the bank for top-up. The bank gives you more amount on the same loan and a new EMI starts.
These are the benefits of balance transfer
- Loans are available from the second bank at lower interest rates than the first bank.
- Extra money comes in hand which can be used to improve the financial situation or complete any other important work.
- You can choose a longer tenure to repay the loan which reduces the EMI burden.
- These are the disadvantages of balance transfer
- The old loan is canceled upon balance transfer. In this the bank charges pre-closure.
- The new amount received after BT is more than the earlier loan. In such a situation the loan burden increases.
- EMI has to be paid more. This affects other expenses of the month. To fulfill these, you may get buried under debt.
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