According to the recent report by TransUnion CIBIL, in the quarter ended September 2019, the delinquency rate on home loans rose by 13 basis points. While the stats represent a repayment insufficiency for a period before the economic downturn, the current financial scenario only creates an improved possibility of such delinquencies.
It is thus suggestive of the increasing default among home loan borrowers in timely repayment of their credits. One of the reasons behind is an increased interest rate on home loans. Resultantly, the slow economy, along with a higher interest rate gives a hard time to borrowers in repaying their loans.
In such a scenario, a home loan balance transfer can be an effective way of reducing the burden of interest cost of the borrowed sum. However, while such a facility makes loan repayment easier, one must also take help from a home loan balance transfer calculator to gain an overall idea of how much he/she is going to save while availing such an offer. Before moving on to the financial tool, here’s a brief look at the financing facility.
Why do borrowers opt for a home loan balance transfer?
A home loan is an excellent way to finance the purchase or construction of a new house. However, individuals need to pay equated monthly instalments (EMIs) to repay the loan, which constitutes two significant parts, the principal and interest components. While the principal repayment is low in the initial phase of loan repayment, interest components remain generally higher.
Hence, borrowers generally opt for home loan refinancing or a balance transfer to lower the interest cost of their existing loan. In such cases, several lending institutions offer better interest rates with favourable terms and conditions so that you can repay your loan without defaulting. Hence, it is best to gain a clear idea of how to reduce your EMIs with a home loan balance transfer.
However, to make the process simpler, you can also use a virtual home loan balance transfer calculator to assess the interest component of the loan and plan accordingly.
Home loan balance transfer calculator – Meaning and reasons to avail
It is an online tool that allows borrowers to calculate the amount they are eligible for as home top-up loan as well as how much they are going to save by doing so.
The calculator also allows an insight into the total amount of home loan a borrower will be eligible to avail with a loan balance transfer. However, for that, they need to mention the following details.
- Existing home loan lender.
- Property location.
- Loan starting month.
- Loan starting year.
- Total loan amount.
- Tenure of existing loan.
- Interest rate of existing loan.
- Rate of interest with the new lender.
Providing these loan details, borrowers can get an accurate result. Top lending institutions provide a home loan balance transfer calculator, which also helps with the following –
- Assess the savings after such transfer is made.
- Select the best lender for such transfer.
- Creation of a repayment plan as per the new loan liability.
Things to consider before opting for a home loan balance transfer
While home loan refinancing can prove to be beneficial in the long term and eases the burden of loan repayment, borrowers need to keep a few essential things in mind while opting for such a facility. These include.
- Just like during loan approval, the CIBIL score of a borrower plays a crucial role when transferring the loan balance. Since it is a suitable indicator of one’s creditworthiness, the new lender assesses the financial history and repayment capacity of the borrower before approving the balance transfer as well as a top-up loan.
- Most financial institutions charge penalty fees or foreclosure charges when a borrower applies to transfer his/her home loan to another lending institution.
- The new lender may also charge processing and additional fees before letting the borrower transfer an existing home loan. Hence, before settling for such a facility, it is of utmost importance to calculate the combined charges and review if all of them outdo the savings made.
To make such an estimation more accurate, one can take the help of a home loan balance transfer calculator.
Along with these financing tools, some lenders also extend pre-approved offers to their existing customers. Such a facility makes loan processing hassle-free and prompt. This offer is also available on different financial products, including home loans, loans against property, etc. You can check your pre-approved offer just by sharing your name and contact number.
Nonetheless, apart from using a calculator for the balance transfer of housing loans, you should also seek other useful guides to getting better home loan interest rate. However, before opting for such a facility, you should consult and compare with different lenders to get the best deal and avoid any discrepancy later.
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