10 May, 2018 Home Loans
After availing a home loan, a customer gets second thoughts on his choice of financer. What if, a customer was not well informed at the time of availing the home loan and finds out that he could have made better choices. Is there no other option left with
Home buying is a matter of huge financial expense and so is availing a home loan. Slight variations in home loan interest rates can result in huge differences in total payment at the end of the tenure. It is very important for customers to ensure that they understand the basic of home loan, how interest rate affects their repayment plan and how does Equated Monthly Installments (EMI) work. EMI calculators can be used to calculate total interest payable and to ensure affordable monthly re-payment capacity. It is highly recommended that one should check all these parameters before availing a home loan in order to make a well-informed decision.
But what if, after availing a home loan, a customer gets second thoughts on his choice of financer. What if, a customer was not well informed at the time of availing the home loan and finds out that he could have made better choices. Is there no other option left with this customer, other than getting overburdened under his current loan?
Well, the solution to this customer’s problem is ‘Home Loan Balance Transfer’. This is kind of product that allows a customer to transfer his/her loan from one bank or NBFC to another. Suppose a customer feels that he is been overcharged by his current financer and there are cheaper loans available in the market by other financers, there are two options that are left with this customer. First, he can approach his current financer and ask for a reduction in his Rate of Interest (ROI), there may be a small chance that his current financer can reduce the ROI. Otherwise, next option and the only option left is to approach another financer that can provide cheaper interest rate and apply for Balance Transfer with him. Home Loan interest rates vary anywhere between 8.35% to 12% or maybe even more than this in few cases. Thus if any customer falls on the costlier side of this scale, it is advisable for him/her to approach a cheaper financer and avail loan at cheaper rates, provided he/she fulfills all necessary conditions of the new bank or NBFC.
How Balance Transfer works:
Once the new financer approves the “Balance Transfer’ loan, the balance outstanding of the current loan is then transferred from previous loan account to the new loan account under the new financer. Since it is a complete product in itself it will be treated as a new home loan application only and thus, formalities and charges will be same as that of any new home loan application. Which means the customer will have to pay Loan Application Fee and any other charges that are applicable to Processing Fee etc.
Basic documentation Required:
Since by now it is clear that a Balance Transfer is also treated as a fresh loan application, most of the documentation required would also be similar to any home loan application. Basic documentation involves PAN card, ID proof, Address proof, latest 3 months Income proof, latest 6 months banking details and a copy of property papers if necessary. Other than these basic documentations there are two important documents that a customer has to arrange and provide his/her new financer. These are Loan Account Statement and List of Documents; both these documents are provided by current financer. ‘List of Documents’ is a document that states the complete set of property related documents that are currently in possession of the present home loan lender.
Conditions in Balance Transfer one must know about:
To avail Balance Transfer, the customer must have served his current loan for at least a pre-determined time period. Normally all banks/ NBFCs keep this at 12 months, i.e. one year. Any customer who has paid at least 12 EMIs will be allowed to apply for Balance Transfer. One of the basic logic behind this condition is that financer gets to check the current track record of loan repayment. If there are any discrepancies like bounces within this tenure, application for Balance Transfer will get rejected.
