A balance transfer is a great way to save money on interest and pay off your existing debt fast. When should you go for it? How does it save you money? How can you avail it? Are some of the common questions which arise in one’s mind when they hear about the balance transfer facility? Well, no need to worry now, here is the answer to all your questions along with a step-by-step guide.
What is a Balance Transfer?
A balance transfer is a great way to manage your existing debts. It helps you to pay down your existing debt faster by transferring the outstanding balance to a new lender/bank at a lower interest rate. The low-interest-rate reduces your payable EMIs and as a result, you will be able to save more.
But before you go for it, it is important to calculate how much money you will be saved along with a few other things. But one of the most important things is to find a lender who is offering the same loan at lower rates and ready to do a balance transfer as well.
When should you go for it?
It is advisable to go for a balance transfer of a loan or a credit card when the outstanding loan amount is higher and you are getting a better deal from another lender. The better deal includes low-interest-rate, low processing fees, flexible repayment tenure or it can also include certain terms which can be in your favour.
*Note- It is always advised to use an EMI calculator before you go for a balance transfer. You need to calculate the new overall cost of borrowing and then based on your existing debt you need to take the decision.
When should you go for a home loan balance transfer?
- Refinance/balance transfer of a home loan can be done when the outstanding amount is high.
- When the balance transfer cost is low.
- When you are getting a better deal from another lender.
- When you are getting favourable terms.
- For flexible tenure.
- Transfer to a lender who allows pre-payment/part-payment.
- For a lower interest rate.
When should you go for a personal loan balance transfer?
- When you are getting a lower-interest-rate offer from another lender.
- When the other lender is offering a balance transfer facility and providing you better deals.
- When you can save more (doing the calculation is a must before you come to this conclusion.)
When should you go for a credit card balance transfer?
- When you realize you are paying more on your credit card interest rate.
- When there is a high outstanding amount on your card.
- When you get a balance transfer card which offers facilities as per your requirements.
- Apply for a card with an introductory 0% APR offer on balance transfer.
*Note- While going for a credit card balance transfer consider APR, the length of the promotional low-APR period, and any other fees which are associated with it.
Steps- to apply for a balance transfer
- Check your outstanding balance and interest rate
- Look for better deals for the same product
- Check for the balance transfer facility with the new lender
- Do proper calculation and analysis
- Do not ignore the pre-closure charges and new processing fees.
- Read the fine print and understand the terms and conditions well
- Go for it only if it fits your requirements and save you a decent amount.
A balance transfer allows you to start fresh with a lower APR which as a result can save you a lot on the interest.
But you need to be very careful before you avail of this facility.
Read all the fine print, and be sure to choose a loan/card with terms that suit your requirement.