How Personal Loan Balance Transfers Work
Are you in a financial pickle and are in dire straits trying to manage your finances?
Are those pesky installment loans giving you a headache?
When an urgent situation strikes, your cash flow gets constrained and you are left with no choice but to take a personal loan from a financial agency with a stupendously high-interest rate because you are dreadfully in need of cash.
Okay, take a deep breath. There are ways to get out of this pickle. You can find strategies to reduce that hefty interest burden. Like a balance transfer. Or to be more precise — refinance or a personal loan balance transfer.
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With a personal loan balance transfer, you can start afresh. You can shift to an interest rate that is way lesser. In fact, a personal loan balance transfer is a great choice for those who are having difficulty paying off their Equated Monthly Instalment or EMI loans.
Here’s how. Basically, a personal loan balance transfer works pretty much like a credit card balance transfer. You can get an interest that is lower and occasionally contingent on your credit history, you may also get a higher loan through transferring your loan balance to another lending institution. This is all dependent on the rules of the banks and your credit profile, among other things.
Perhaps you’re wondering if this is a better idea. Well, doesn’t it sound like a better idea — lower interest rates, thereby lowering your monetary burden? Your financial woes can be zapped in one go. However, if you really want to be dead sure that this is a better plan of action, it’s best to look into and compare what personal loan refinancing offers the financial institutions have for you.
As mentioned, the topmost reason for opting to go for a balance transfer is getting a better rate of interest. There are several factors involved here — one would be your salary increase and credit history. If there is an increase in your pay and your credit history is in good standing, then you can opt to request for a higher amount of loan with a lower interest.
The good thing about a personal loan balance transfer is you can appeal for an increase in your loan amount. As long as you have a good credit history — there’s a huge chance that the new lender will grant that request. Of course, getting into a personal loan balance transfer will entail some risks. You need to be aware and more cautious about the different details associated with the procedure. Here are some key points to consider to help you decide if this action plan is for you or not.
Before you sign your name on that dotted line, it’s best to make an assessment whether you’re really going to pay less for this new credit. If after an evaluation and you have taken into consideration the fees and charges involved in the process, you realize that you will end up paying more, then it should be a no go.
That’s definitely a no brainer. You also need to take into consideration the tenure of the loan. The best way is to pay higher over a short period. However, if this is not viable, given your present financial circumstances, then you may opt to pay lower over a long period.
The next thing you need to check is the details. It’s time to be diligent. Take time in reading the minutest details or fine print of the credit document. Make sure you didn’t miss out on every single detail. Painstakingly read everything that is related to your loan on the document. It will probably eat a lot of your time but in the future, it could help you avoid a whole lot of inconvenience.
Now check out and make sure you have taken into consideration all the processing fees and other charges attached to the loan. It is important to know and see these things clearly right at the onset. Check out if you need to pay some penalties to the previous lender.
There’s a possibility that the lenders will ask you for a fee for the principal amount being transferred. These fees could be hefty, depending on the amount of your loan. Needless to say, having a thorough understanding of the charges and fees will be beneficial to you.
Various financial institutions and lenders will entice you with their balance transfer offers. There’s no harm in considering and accepting one of the offers. Just remember that it is crucial to know what you need and what is best for your situation. Remember, you are doing this because you want to get out of a financial fix, not to get into another one.
Also, be wary of the fine print — don’t just jump in if you see lower rates, make sure you consider the costs and fees attached to the new loan. Finally, when you have decided to go for it, don’t forget to pay your instalments in full and on time. The goal is to get out of the problem and to have a better credit history.
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