People who have availed a home loan can easily know the pinch of paying heavy EMI amount every month and how a major portion goes only towards the interest payment.
As a result, a majority of the home loan account holders think of switching their home loan accounts from one lender to another using home loan balance transfer facility.
Yes, is the process of switching or transferring the existing or ongoing home loan into another bank or NBFC. The facility is major undertaken when a borrower finds better services and an interest rate on offer in the market.
People chose housing loan balance transfer to reduce the interest rate and overall EMIs so that they can also reduce the cost of the loan, and save money. An accurate estimate of the money saved in this way can be made by using a available online for free use.
Although there are lots of home loan balance transfer that one could avail, the process is not that easy as it looks on paper. Other than fulfilling extra formalities, there are some major hurdles that you also need to care for!
Let’s provide four such major hurdles of a home loan balance transfer in brief!
It’s a Tiring and Tedious Process
The entire procedure of switching the home loan from one lender to another is a tiring process that may consume a lot of your time, and you may not do it at all. Also, a borrower is always doubtful if the process will actually work in lowering the interest rate as some lenders offer a deal on lower interest as a part of the gimmick. Once someone transfers the loan, the rate is increased after some months. Thus, a borrower does not want to land in soup, do all the formalities and still pay higher interest rates. Also, sometimes, the overall cost of the processing fee for balance transfer along with other charges may make it a costly deal to afford.
An Open-ended Risk for A New Lender
A balance transfer offers only the chance to switch the home loan account from one lender to another to avail better services and lower interest rates. However, there is no ownership of transfer involved. You are just moving the loan account from one service provider to another to avail better deals. Availing better deals may help increase the savings.
A new bank or lender will consider a home loan balance transfer as a fresh home loan application; you will have to make payment for fees once again as per the percentage on leftover loan figure. The fee can vary between 0.5% and 1% of the outstanding loan amount. Hence, if you are sure of making some savings in paying lower EMIs and if the fees for doing it more than it, you should take a decision smartly. There is no point in still paying a large amount as fees and still pay almost similar EMIs as earlier.
Since you have to avail a No Objection Certificate or NOC from your existing lender, you may have to convince them about switching the home loan to another lender. Yes, a lender may not give you NOC if it finds your reason unsatisfactory. Some lenders may not want you to leave them mid-way and purposely may not issue a NOC even if you are eligible. There are many corrupt practices that also go into the financial industry, and you may not get clearance to switch a home loan account easily.
The Bottom Line
Now that you are aware of the hurdles that you may face while doing a home loan balance transfer – assess your needs once again and then only apply for it.
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