What is Balance Transfer on your Personal Loan?

Balance transfer on personal loan

Found a better loan scheme after already availing of a loan? Worried about paying hefty interest? Sometimes we decide on a loan option that seems to be the best until another better scheme lands in the market. In such a scenario, it is best to calculate your outstanding loan amount and avail yourself of a personal loan balance transfer.

Balance transfers reduce your financial concerns and buy you more time to pay off debt. Most lending institutions offer this facility of transferring existing personal loans from one lender to another. However, you must have at least INR 50,000 as your loan amount to take balance transfer offers on personal loans.

How does a personal loan balance transfer work?

A personal loan balance transfer, as its name suggests, is the process of transferring one’s loan amount from one lending institution to another. If you are dissatisfied with your present lender or would want to transfer your loan to another bank that offers a lower interest rate, you could explore this option. You would have an excellent credit history, a prerequisite for lenders, if you have a regular repayment record and have paid at least 12 EMIs or more without a gap. You may also enjoy other benefits like zero processing fees fif you choose to opt for this facility.

When should I do a personal loan balance transfer?

A personal loan balance transfer comes in handy when you want to avail of lower interest rates from another lender or increase your payment tenure. You can also take a top-up loan over your existing loan amount to pay for other expenses.

Home loans are a type of personal loan that is often taken with a longer payment tenure. If your income has fluctuated in recent years and you are finding it difficult to keep up with the existing EMI burden, you may consider shifting the loan to another lender with lower monthly installments.

If you have multiple ongoing loans and are unable to keep track of so many payments, you can do a personal loan balance transfer. Split the new loan amount to close all the other ongoing loans, so then you will only have to pay a single EMI every month.

Eligibility criteria for a personal loan balance transfer

  • You must have an ongoing personal loan to avail of the loan balance transfer facility.
  • You must have paid at least 12 EMIs without a gap to establish trust with a new lender.
  • An excellent credit repayment history, with a CIBIL score between 600 to 750 would prove your creditworthiness to the new lender.
  • Your outstanding loan amount must be above INR 50,000 to do a loan balance transfer.


Documents required for a personal loan balance transfer

  • Proof of identity: Voter ID or PAN card or Aadhar card or driving license or passport
  • Address proof: Electricity bills or rent agreement or Aadhar card or telephone bills
  • Last three months’ salary slips: If you are a salaried individual, you must show the last three months’ salary slips.
  • Bank transaction statements: At least 6 months bank transaction documents
  • Application form: Attested loan application form with a passport-sized photo
  • Personal loan statement of existing bank: Personal loan statements from your existing lender


A step-by-step guide to doing a personal loan balance transfer

  • Find low-interest loan schemes: If you are finding it difficult to pay off the monthly installments and want a new lender, scour the market to find balance transfer offers on personal loans with low interest. You may also explore Andromeda to get a broad range of loan deals. Lesser interest means that you will be able to save money and pay lower EMIs.
  • Compare processing fees and other charges: Make sure to calculate the cost of transfer and measure it with your outstanding loan amount. Most banks charge a processing fee when one avail of loans, and you have to pay foreclosure charges at your existing bank. If your additional payments exceed your loan amount, it is not worth it. The best option is to use a personal loan balance transfer calculator to weigh your net benefits and then make a decision.
  • Negotiate with your existing lender: If you have found lower interest rates at other lenders and do not want to switch lenders, you can have a discussion with your existing lending institution. If you have a regular repayment record, an excellent CIBIL score, and overall a good relationship with your bank, they may offer you benefits and a possible lower interest rate. This is why it is better to choose home loans with floating interest rates, as they fluctuate with the market interest rate.
  • Get NOC from the existing bank: If you decide to shift lenders, you have to get a ‘No Objection Certificate’ from your existing bank before going over to a new lender.
  • Apply for a new personal loan: Fill out a registration form with all your basic details, submit an identity and address proof, and apply for a personal loan from a new lender.
  • Submit foreclosure documents at your existing bank: In addition to paying processing fees at the new lender, you have to also pay foreclosure charges at your existing bank. You have to close the account at your existing lender and submit whatever documents they require.
  • Sign the new loan agreement: The final step to a loan balance transfer is to obtain a sanction letter and sign the loan agreement with your new lender. Take loan disbursement from the new lender through a cheque or demand draft and clear all your dues with the existing lender.


As soon as the lender receives the outstanding amount, they will close your loan account, and you will be required to pay monthly installments at the next due date to your new lender.

Benefits of doing a personal loan balance transfer

  • Pay less interest

One of the biggest motivators to shift your existing loan amount to another lender is if they offer lesser interest rates. Lesser interest means that you can save more money and pay lower monthly EMIs.

  • Extend repayment period

Another benefit of doing a personal loan balance transfer is that you can enjoy a longer repayment tenure. The new lender will consider your loan as a new loan, so you can increase the tenure and make sure that the EMIs fit your monthly budget.

  • Hassle-free verifications

Since a reputed lending institution runs background checks and verifies all your documents, you have to undergo minimal hassles with a new loan facilitator.

  • Get top-up loans

Since the new lender will consider your loan as a first, you can also avail of a top-up loan with lesser interest rates.

  • Avail of better services

You can also base your decision of switching lenders on better customer service. If you want a lender that sends you timely reminders or allows a longer repayment tenure, you can do a loan balance transfer.

While it is tempting to instantly choose another lender and transfer your existing loan amount, you must not be hasty. Make sure to evaluate the processing charges, other payments, and foreclosure charges before doing a loan transfer. If your bank charges an outrageous amount on processing fees, you will end up depleting a huge chunk of your savings. Also, you must ensure that you have enough credit and monthly income to pay your EMIs. It is best to consult one of their experienced loan experts to understand how balance transfers work on personal loans and make an informed choice.