Amit has availed home loan at 10% and there are 15 years remaining to repay the loan where in the 20 lakhs that is unpaid principal amount. If he decided to switch the loan to 9%, then in a year he would able to save ₹14,484 rupees and in 15 years, he would be able to save ₹217260 rupees.
Sumit has also availed a home loan at 10% and there are 15 years remaining to repay the loan where in the 25 lakhs that is the unpaid principal amount. If he decides to switch the loan to 9%, then in a year, he would be able to save ₹18,336 rupees and he would be able to save ₹275040 rupees.
If, we evaluate both the cases, it is precisely justifiable that home loan balance transfer is more advisable for Sumit as he is having more outstanding amount pending and the switch can earn more savings for him. The home loan balance transfer is a time and cost consuming process, hence the person should take such decisions very carefully. The proper research regarding the entire process of home loan transfer, the documentation, liaison process, etc. are to be done properly. If the person is able to properly strategize, then he or she can save enormous amount of money and funds by using the home loan balance transfer option.
Balance transfer of a home loan is an effective tool to reduce the burden of EMIs. Balance transfer of a home loan takes place, when the total unpaid principal loan amount is transferred to another lender such as banks, financial institutes, NBFCs etc. at a lower interest rate. However, there are certain factors that have to be kept in mind while you are making the balance transfer decision that is Total amount of unpaid loan, rate of interest offered and remaining duration to pay off the loan. Also, the balance transfer decision should be taken once you carry out proper analysis. The person should check out all the available options in the market, that is giving you the home loan balance transfer options and chose the deal that is most appropriate for the person, and the same can be helpful as a cost & time saving option.
Home loan balance transfer is a viable tool because the tenure of the home loan is high and thus, if the borrower comes across any lender that can offer the loan at considerably low rate of interest, then he or she can reduce the home loan burden to a greater extent. The person, who intends to go for the balance transfer option, should necessarily carry out the cost and benefit analysis before opting for any option. One should calculate the internal rate of return (IRR) from the transfer as well. However, if the outstanding amount that has to be paid is too less, then it is not advisable for the person to opt for the home loan balance transfer because there is a possibility that a person may end up paying similar or even higher amount compared to the current lender. That ways it is a loss incurring business for the person. At the same time, if the person is in the early stage of the loan, where the outstanding amount of loan is high, and the person is getting a better deal from the new lender, then the person should certainly opt for the new deal. Such deals can give the person relatively lower rate of interest that has to be paid for the loan. This can reduce the burden of the loan to a person and the cost savings can be done.
Once, the rate of interest has been lowered, it automatically helps to lower the monthly instalments that have to be paid. This way, the financial budget of the person can be maintained in a better manner and the repayment of the loan can be easier without hampering the monthly budget of the person. With the help of home loan balance transfer, you can even repay the loan in relatively decreased tenure if you are able to manage & execute the proper financial planning. Also, the terms & conditions are to be checked properly.
Explore the home loan balance transfer option after exploring the suitable alternative deals available in the market. The careful and appropriate decision can lead to get advantageous fruits for you and you can enjoy the benefits of the same for the longer run.