When it comes to choosing between personal loan balance transfer and personal loan, both have their own merits and demerits. You should know when is the right time to switch. You should opt for balance transfer, if your loan EMI burden is higher with an existing lender such as higher interest rates, high loan related charges,and also the offered loan amount is less. Compare the new lender interest rates along with additional loan amount eligibility to meet your requirement, if any. It will help you to reduce loan burden.  You should make sure the interest rate difference is significant, the savings are higher than the new charges, the offered loan amount is higher than what you got, and you have the flexibility to prepay or part pay or the loan amount. 

If your new lender is unable to provide the benefits mentioned above, stick to your existing personal loan. If you see nominal benefits, it would be a wise decision to continue your existing personal loan until you grab a beneficial deal in the future.   

Personal Loan Balance Transfer v/s Personal Loan: Which is Better Option?

Both Personal loan and personal loan balance transfer are ideal instruments that can be availed to meet instant financial needs. Which one is better is undoubtedly a dilemma that comes in every borrower’s mind. Showing the comparison between personal loan and personal loan balance transfer to have better clarity. 

Comparison between a personal loan and personal loan balance transfer

ParticularsPersonal LoanPersonal Loan Balance Transfer
Who Can AvailNew BorrowerExisting Borrower
How to AvailOnline/OfflineOnline/Offline
TenureUp to 5 YearsUp to 5 Years
Processing FeeUp to 2.50% of the loan amount+GSTUp to 2.50% of the outstanding loan amount+GST
It can only be availed ifThere is no such condition attached to personal loanIf the outstanding loan amount should be at least Rs.50,000.You have repaid your loan with 9/12 EMIs
Documents RequiredKYC DocumentsNOC Certificate from previous lender, Recent loan statement along with KYC Documents
Fee & ChargesOne-time processing fee (Prepayment & Part Payment charges are optional)A borrower again needs to pay a processing fee to the new lender ((Prepayment & Part Payment charges are optional)

Be a calculative and smart borrower, and if you do not see any beneficial reasons to switch, you are advised to stick to your existing lender until you get a beneficial offer. Switch your existing lender only in the below conditions. 

Consider Personal Loan Balance Transfer If:

Existing Rates & EMIs are Higher: A competitive interest rate will reduce your overall loan repayment burden. reduced interest rates are directly linked to your EMIs, a slight change in rates can bring a lot of difference in monthly installments. Thus, under such a situation of lower interest rate, a borrower can expect the EMIs to be affordable, hence a less loan repayment burden. 

 EMI comparison between a personal loan and personal loan balance transfer

LendersInterest RateLoan AmountTenureMonthly EMI(in Rs)Total Interest Amount(in Rs)Total Amount (Principal+Interest)(in Rs)Yearly EMIs(in Rs)Yearly EMIs Savings(in Rs)
After repaying the loan for 2 Years, Outstanding Loan Balance=Rs.5,76,509

The above table clearly shows a savings of Rs.24,288, if you opt for a personal loan balance transfer at lower interest rates. 

Tenure is Short: A short tenure means a high repayment burden. if your loan tenure is short, which means the amount of your monthly installments is high. And, within that short tenure, a borrower needs to repay the loan with higher EMIs. So, opt for a lender, providing longer tenures so that your EMI amount will be reduced. Thus, less burden on your shoulder as far as repayment is concerned. 

No Additional Loan Amount:. Make sure your new lender offers a higher loan amount compared to the existing one. Also, the amount should be enough to meet your needs. Here, a borrower can also ask for a top-up loan from a new lender. Under which, additional money(certain loan amount) will be given on an existing loan amount. However, not all lenders offer the Top Up facility, kindly check the same before applying to your new lender. 

What is Top-up Loan?

With the help of a personal loan top-up, a borrower can get the additional money(certain loan amount) on a borrowed loan amount. This top-up facility allows a borrower to have extra funds to meet his needs. However, top-up loans are either given for the outstanding period of the existing personal loan or a certain period. The tenure changes from bank to bank.  

Services are Less: Looking for better customer services and privileges? Personal Loan Balance Transfer is needed. In case you are not satisfied with the services being offered by your existing lender, a balance transfer is here. 

There is an Employment-based Scheme

Lenders often offer lowest interest rates to salaried professionals working in some of the highly reputed organizations. If you are working in such an organization, you may check the availability of such an offer for your organization and consider a balance transfer. Many lenders come up with special offers for professionals like Doctors, Chartered Accountants and Architects to name some. If you are such a professional, you can utilize these special offers and go for a balance transfer. Similarly, as a self -employed individual if you find a special offer on a new personal loan, you may consider the balance transfer option.

Things to Keep in Mind While Opting for Personal Loan Balance Transfer or Personal Loan

1.Compare & Evaluate Lenders for:

  • Lower Interest Rates
  • Affordable EMIs
  • Maximum Loan Amount
  • Additional Amount(Top up)
  • Less Documentation
  • Minimal Processing Fee
  • Better Services & Perks

2. Read Loan Agreement & Fine Prints Carefully

3. Do Not Forget the NOC from Existing Lender

4.Pre-closure Terms and Conditions with Existing Lender

5. Avoid Signature Mismatch

6. Do Not Give False Information/Details

Quick Tip: Be a calculative and smart borrower here as the marginal difference in interest rates and EMIs won’t give you the maximum benefits. Yes, make sure that your new lender is offering the loan at a much lower rate as compared to your ongoing loan with the existing lender. The more the gap, the higher amount you can save on your EMIs.