Personal Loan Balance Transfer


Personal Loan Balance Transfer (PLBT) is a service provided by lenders that allows people who already have a personal loan from a different bank or financial institution to switch their existing loan to a new lender offering lower interest rates.

Personal Loan Balance Transfer Interest Rates

If you decide to switch your personal loan to a new lender, they usually offer lower interest rates than what you're paying with your current lender. The interest rate they give you depends on things like how much of the loan you've already paid, how long you'll take to pay it off, your credit score, and how much money you make.

Balance Transfer Processing Fees and Charges

If you're moving your personal loan to a new lender and your current loan has a fixed interest rate, your existing lender might ask for a foreclosure fee, which can go up to 5% of the remaining loan amount. However, if your original personal loan has a floating interest rate, there won't be any foreclosure fee. The new lender, on the other hand, will charge a processing fee for the personal loan balance transfer, ranging from Rs. 500 to 4% of the remaining loan amount.

Calculation of interest cost savings generated from Personal Loan Balance Transfer

Here's a table to show how transferring your personal loan to another lender could save you money on the total interest you have to pay:

Original Loan Amount Rs. 5 Lakh Rs. 10 Lakh
Existing Rate of Interest 15% p.a. 15% p.a.
Original Repayment Tenure 60 months 60 months
EMI already paid 12 12
EMI to be paid 48 months 48 months
Existing EMI Rs. 11,894 Rs. 23,789
Outstanding Loan Amount Rs. 4,27,416 Rs. 8,54,819
New Rate of Interest 11.50% p.a. 11.50% p.a.
New Tenure 48 months 48 months
New EMI 11,150 22,301
Total Savings Rs. 35,712 Rs. 71,424

Benefits and Features of Personal Loan Balance Transfer

  • Lower Rate of Interest: One of the main reasons people choose to do a personal loan balance transfer is to get a lower interest rate and, as a result, cut down on the total amount they pay in interest.
  • Longer Repayment Tenure: Using the personal loan balance transfer option also allows a borrower to choose a longer repayment period than what remains on their existing personal loan. Opting for a longer tenure decreases the monthly EMI, making it more manageable. However, it's important to note that this might result in a higher overall interest cost for the borrower.
  • Avail Top-up Personal Loan: Transferring an existing personal loan often comes with the added advantage of being eligible for top-up personal loans from many lenders. This feature is particularly beneficial for current personal loan borrowers who might face difficulties in getting top-up loans or are charged higher interest rates for them.

Eligibility for Personal Loan Balance Transfer

Personal Loan Balance Transfer (PLBT) Eligibility Criteria:

1. Age:

  • Minimum age: 21 years
  • Maximum age: 65 years

2. Occupation:

  • Salaried individuals and self-employed professionals

3. Existing Loan Requirements:

  • Outstanding loan amount should be at least Rs. 50,000 or as defined by the lender
  • Clean repayment history on existing loans

4. Work Experience:

  • Generally, a minimum of 1 year of work experience is required; some lenders may require longer work experience

5. Minimum Monthly Income:

  • Monthly income should be at least Rs. 15,000

6. Credit Score:

  • CIBIL score of usually 750 or above

Note: Check the complete Personal Loan Eligibility Criteria before applying

Documents Required

Required Documents for Personal Loan Balance Transfer:

1. Duly signed application form with passport-size photographs.

2. Identity Proof (Any one of the following):

  • PAN card
  • Driving license
  • Passport
  • Voter ID
  • Aadhaar Card, etc.

3. Age Proof (Any one of the following):

  • PAN card
  • Driving license
  • Passport
  • Voter ID
  • Aadhaar Card, etc.

4. PAN Card (Mandatory).

5.Address Proof (Any one of the following):

  • Aadhaar Card
  • Passport
  • Landline Bill
  • Latest Electricity bill
  • Rent agreement, etc.

Note: Check the complete Documents Required for Personal Loan before applying

Additional documents required for both salaried and self-employed individuals are as follows:

For Salaried Individuals:

1. Salary slip for the last 3 months.

2. Last 6 months’ bank statement.

3. Statement of the personal loan from the current lender (for the loan that needs to be transferred).

For Self-Employed Individuals:

1. Business PAN card.

2. Business address and vintage proofs.

3. Last 6 months’ bank statement of both the individual and the business entity.

4. Last 3 years’ Balance sheet along with a profit and loss statement related to the business.

5. Statement of the personal loan from the current lender (details of the loan that needs to be transferred).

Process of Personal Loan Balance Transfer

Steps for Personal Loan Balance Transfer:

1. Check what interest rate other lenders offer and see if it saves you money on your loan.

2. Figure out the total cost of transferring, including any fees.

3. Decide if the benefits outweigh the costs. Pick a few potential lenders.

4. Compare interest rates and how much you can borrow from the lenders you shortlisted.

5. Choose a new lender, then ask your current lender for a No Objection Certificate (NOC) and a letter saying you're paying off your loan.

6. Apply to the new lender, giving them all the necessary documents and your repayment history.

7. Get approval and sign the new loan agreement.

8. Get the outstanding loan amount from the new lender through a cheque or draft made out to your old lender.

9. Once the old lender gets the money, they'll cancel your old loan and close your account.