After the news that the repo rate would be raised by the Reserve Bank of India (RBI), there has been constant debate regarding what borrowers of existing housing loans should do next. Interest rate hikes have prompted many homeowners to reconsider their mortgages. If you fall into this category, read on to see how a simple balance transfer could help you save money and cushion the blow of the recent interest rate hike on your home loan from Shriram housing finance.
Then, what does it entail to “transfer the amount” of a mortgage?
In order to take advantage of better service or lower interest rates on your Home Loan, the majority of lenders offer a service known as “home loan balance transfer,” which entails transferring your current outstanding housing loan balance from your present lender to a new lender. Possible motivations for the move are discussed.
Here are several scenarios in which a current borrower on a Bajaj Finance Home Loan would wish to think about requesting a balance transfer:
Modifying the rating system to be more in line with an external benchmark
The Reserve Bank of India has mandated that beginning October 1, 2019, all banks adjust their interest rates in accordance with an external benchmark such as the repo rate. The external benchmark regime is more transparent than the PLR-based rate regime and the MCLR method, and it can better convey the benefits of the policy rate to borrowers paying loan EMIs. Banks are required to make and communicate the modifications at least once every three months, regardless of whether the change is an increase or a decrease.
In light of this, an external benchmark is preferable since it guarantees that any rate reductions will be passed on to the consumer.
Homeowners who have loans with non-bank financial institutions (NBFCs) or housing finance companies (HFCs) like Shriram housing finance, or even banks operating under a more traditional regime, may want to investigate the potential of converting to an external rate structure. To do so, customers can either convert their present EMI payment to an institution that offers such a regime or ask their current lender to allow them to do so.
Reducing interest expenses generally.
A home loan balance transfer may be initiated for a number of reasons, the most common of which is to take advantage of a lower interest rate being offered by another lender on the borrower’s existing bajaj finance home loan. This will result in a lower total amount of interest paid out throughout the life of the loan. Before choosing a new lender based on the interest rate alone, though, it’s important to consider all of the fees and costs involved. The new lender may treat your application to transfer the balance of an existing home loan as a new loan application and may assess fees and costs to your Shriram housing finance, such as a processing fee and an administrative charge. If you factor these fees into your overall interest cost reduction calculation, you may decide whether or not to move forward with the transaction. Otherwise, it’s best to keep making payments on your Home Loan EMI to your current lender.
No progress was made in renegotiation with the existing lender.
You may wish to consider a home loan EMI if you are unhappy with your present lender or if your lender has denied your request for a lower interest rate or better terms of service. If your present lender has declined your request for a rate reduction or improved conditions of service, you have one option available to you. A new Home Loan lender like bajaj finance home loan may need you to meet certain requirements before processing your application to move your balance. Before finalising the new conditions, consider negotiating for a larger loan amount (to pay for repairs or additions) or adjusting the remaining loan term to better suit your needs. Both options are possible through balance transfers.
Supplemental Funding Needed Because Your Current Bank or HFC Can’t Help
A top-up loan is an additional loan that is granted on top of the current loan balance. The majority of lenders offer this to borrowers for many different purposes, including paying for a child’s college tuition, making repairs to a home, or paying for medical care. Like personal loans, top-up loans don’t often restrict how the money is spent once it’s been obtained. Further, the interest rates for top-up loans are often cheaper than the interest rates for most other types of secured loans and even personal loans. Another option to explore is consolidating your existing debt with the money you’ve gotten from the top-up loan from Shriram housing finance.
If a borrower currently has a mortgage but needs more money, but their present lender doesn’t offer top-up loans or denies their request for a top-up loan, the borrower has the option of transferring the remaining balance of their loan to a new lender.
Additionally, if the approved amount of the top-up loan is insufficient, you may want to consider moving the remainder of your current house loan to a new lender who can assess your eligibility for a bajaj finance home loan top-up in an appropriate amount.
Now that you are aware of the various aspects of housing loan balance transfer, it’s no less important to beware of myths surrounding these large ticket loans like the one from Shriram housing finance. The common misconceptions include- the best option is to select the loan facility having the shortest tenure possible, applicable interest rates can never be negotiated with any lender, one should always go with the cheapest interest rate lender, possessing a high credit score means 100% guarantee of housing loan approval, assuming that financial institutions charge high fees for prepaying, and last but not least, thinking that when interest rates begin rising up, your EMIs will immediately rise too.
All these are myths! Never commit the mistake of blindly believing any hearsay around these myths, and do your own research or consult financial experts when in doubt.