It’s now well-appreciated that a personal loan can come to your rescue when you are ‘hit’ by a sudden financial crisis. ‘Tailor-made’ personal loan schemes are available these days so that you can ‘weather the storm’ with effortless ease.

But, it is observed that people often avail personal loans without comparing the best offers. In an attempt to ‘sail through the troubled waters’ as soon as possible, they often end up opting for a personal loan with a high interest rate. They realize it only when they get over the turmoil and breathe a little easier.

But, it’s never too late and they can still make the interest rate and other terms of their personal loan more suitable to themselves; courtesy- personal loan balance transfer.

In this blog, we will tell you about what a personal loan balance transfer is and how you can avail it.

What is a Personal Loan balance transfer?


Originally, balance transfer schemes were part of credit card offers but were extended later on to other facilities of credit. These days, balance transfer schemes are integral parts of offers related to personal loans, home loans, business loans and other credit facilities.

It goes like this. When a customer decides to do a personal loan balance transfer, he decides to transfer the outstanding balance of his personal loan to a new lender. As a tradeoff, the new lender offers certain favourable terms to him such as lower rate of interest ( than his earlier lender), waiver of processing fee and so on. It also repays his outstanding balance with the previous lender.


The borrower is benefited in this bargain because his debt burden gets reduced. However, he may need to incur charges such as foreclosure charge (with his earlier lender), stamp duty and so on. After the deed of balance transfer is executed between the borrower and the new lender, all the remaining EMIs of the personal loan need to be paid to the new lender only.


Personal Loan Balance Transfer Eligibility Criteria

Before according the necessary approval for a loan balance transfer, the potential lender would like to assess the creditworthiness and repayment capacity of the applicant. Therefore, the applicant needs to meet certain eligibility criteria to the satisfaction of the lender, before he can avail the balance transfer facility. Some general eligibility criteria earmarked by most lenders are mentioned below-

  • The applicant must be the borrower of a valid and existing personal loan from a registered bank/financial institution
  • The applicant must possess a clean repayment history related to his existing personal loan. To ascertain this, the prospective lender will need records of a minimum of 12 previous EMI payments related to the existing personal loan.
  • The outstanding balance of the personal loan to transfer should be in excess of Rs. 50,000.
  • A credit score above 700 is desirable


Personal Loan Balance Transfer Documentation Criteria

The applicant needs to furnish the below-mentioned documents along with his Balance Transfer application-

  • Identity proof ( any one from PAN card/ passport /driving license / Voter ID / Aadhaar card)
  • Proof of address (Anyone from rent agreement/Aadhar card /telephone bill /Electricity bill/)
  • Valid age proof
  • Bank account statement for the last 6 months, salary slip of last 3 months
  • Statement of the personal loan to be transferred, along with payment proof of the last 12 EMIs.
  • Duly signed passport size photograph


Benefits of the personal loan balance transfer

Here is how a personal loan balance transfer can benefit you-

  • You can put your debt off much faster

Post the execution of the balance transfer deed, you will enjoy a lower interest rate and a lower EMI, as a result. This means you can put your debt off much quicker. If the high interest rate of your existing personal loan is giving you a tough time, you may opt for the balance transfer option and get rid of your debt quicker.


  • You can save on the interest amount

As stated before, lenders offer reduced interest rates if you transfer your existing personal loan balance to them. With lower EMIs from the new lender, you can save your hard-earned money every month.

An example will make things clearer. Let’s assume Mr. Subodh has obtained a personal loan from Bank X for Rs 3, 00,000 @ 15 % interest p.a. for 3 years. So, his EMI will be Rs 10,400 and he will need to pay an interest amount of Rs 74386 over his personal loan tenure.


Now, we assume that after paying 14 EMIs to Bank X and with a balance of Rs 2, 00,000, Mr. Subodh decides to transfer his personal loan balance to Bank Y. This new lender is offering an interest rate of 12% to him. After the transfer process gets completed, his EMI is reduced to Rs 9322. Also, the total interest payable to Bank Y on the remaining loan amount is Rs 23,718 as against Rs 29840 payable to Bank X before the transfer.

  • You may get the top-up facility

Many lenders offer attractive loan top-up facilities to potential customers along with balance transfer schemes. You can avail loan top-ups if you need additional credit. These additional top-up offers usually come with lower interest rates and less documentation.


  • You can adjust personal loan tenures as per your need

While transferring your personal loan balance to a new lender, you can negotiate on the terms and conditions attached. Accordingly, you can ‘tweak’ the repayment tenure with the new lender as per your need. In case the tenure is extended, you will have lower EMIs, but the total interest would increase. If the tenure gets reduced, the total interest payout decreases but your EMIs will remain on the higher side.


  • You can consolidate your payments


If you are having multiple personal loans from different lenders, you must be having a tough time keeping track of them. If you decide to transfer all your existing loans to a lender that gives you better loan features your life will be a lot easier. You can choose to have a single due date for all your loans. This way, you no longer need to keep track of a number of due dates every month. In addition, you will be entitled to receive other benefits (such as lower interest rates, processing fee waiver etc) that were not available with any of your personal loans earlier.