Things To Consider Before Opting For A Home Loan Balance Transfer
Buying a home can be a dream of every person, and this dream can be made possible with the help of Home Loans. Home Loans are a lending product offered by the lenders which can help you buy a house. For a Home Loan, the lender provides you financial funding to buy a house which is to be paid in the coming years. The lender provides you money with an interest rate which is added to your final repayment amount and is calculated on a yearly basis.
There are times while repaying a Home Loan the applicant may face unpredictable problems like medical emergencies, job loss or the applicant might not be able to pay the loan due to the sudden change in the rate of interest applied by the lender. In such a situation, people often tend to default on the monthly payments, but there is another way by which you can manage your loan amount. You can opt for a balance transfer.
What is a Home Loan Balance Transfer?
A Home Loan balance transfer is a provision using which you can shift your outstanding loan amount from your current lender to a new lender.
Why do People choose Home Loan Balance Transfer?
A Home Loan balance transfer can help you in many ways; it can help you tackle the following problems:
High-interest rates: A Home Loan has a high principle amount, and an interest rate on such a high amount can be frightening. The interest rate on loan is calculated annually and is added to the final repayment amount. Hence, a Home Loan with a high-interest amount can be a problem for a person with a longer tenor.
Interest rate switch: Sometimes the applicants apply for a floating interest rate, due to the lower rate offered at the time of loan application. However, floating interest rates are subject to market change. Due to this, the interest rate might rise to a substantial amount making it hard for the applicant to pay the loans. In this scenario, the applicant can switch the loan interest rate within the banks or change the lender for a lower interest rate.
Taking time to manage finances: There might be a time when the applicant might not be able to manage the loan due to the financial conditions. Hence, the applicant can take some time called as a ‘breathing gap’ which is offered by many lenders after a loan switch.
A balance transfer can be a relieving option, but if treated with negligence, it can cause a problem in the latter period. Hence, these are the things you need to keep in mind while applying for a balance transfer.
Processing fee: When you apply for a loan switch, the lender will charge you a processing fee which can be around 0.5 percent to 1 percent of the outstanding loan amount. Since the balance transfer process is similar to the Home Loan procedures; the processing fees are non-refundable.
Interest rates: If you are changing your lender due to the strict terms and conditions, it is important that you check the Home Loan interest rates applied by the new lender or you may end up paying more to the new lender for the final repayment.
Other perks: There are many lenders that provide perks like zero penalties for payment default, zero penalties for cheque bounce, breathing time, 3 EMI vacation, etc. You need to check these perks as they will benefit you while repaying the loan.
Home Loan balance transfer can help you manage your Home Loan and make it easier for the repayment in the future.