Thursday, June 6, 2024

The Ultimate Guide To Car Loan Balance Transfers: What You Need To Know Before Making The Switch?

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Many people avail of a car loan to buy their dream car. But what happens when they realise while repaying that there were better and more affordable options? If that is the case, they can transfer the outstanding loan balance to a lender of their choice.

The process of transferring the outstanding loan amount of an existing car loan to a new lender is known as a car loan balance transfer. Here is a detailed guide on everything people need to know about car loan balance transfer.

Reasons to opt for a car loan balance transfer 

Before delving into the details of how to transfer a car loan balance, it is essential to have a clear understanding of why people opt for it:

  • Better repayment terms 

Usually, when borrowers see that a new lender is offering lower processing fees, foreclosure charges and other fees, they decide to transfer their balance. Lower foreclosure charges and default penalties are important reasons behind car loan balance transfers. 

Borrowers who are finding it difficult to pay their EMIs may opt for a balance transfer if they come across a lender offering flexible repayment options. Conversely, borrowers whose income has increased may want to increase their EMIs to reduce the loan tenure.

  • Improved loan services 

A few important factors that borrowers want from lenders are helpful customer service, low additional charges and flexible repayment terms. There can also be situations when they wish to foreclose or prepay their car loan with some of the additional funds they have in hand.

If a person’s current lender does not offer these facilities, one may switch to a more supportive lender that offers better services.

  • Lower interest rates and top-ups

Lower interest rates are the reason why most people opt for a car loan balance transfer. Even a small decrease in the interest rate can reduce the total cost of a loan considerably. Another reason is to avail of facilities like top-up loans.  

If a borrower knows that they would need a top-up loan at a particular time, they may switch their loans. If the existing lender has no provision to sanction a top-up loan, it would be wise to transfer to a lender who does.

Detailed steps to transfer car loan balance 

Here are the detailed steps for a car loan balance transfer: 

Step 1: Check the loan terms 

First, it is important to check whether the existing lender has any issue with the transfer of the outstanding car loan or not. A borrower can check the terms and conditions written on the loan contract. 

While most lenders don’t have a problem with the process, one should always check. Lenders might levy additional charges for the balance transfer. Borrowers should carefully assess if the benefits of a balance transfer outweigh the cost.

Step 2: Find a suitable lender 

It is important to undertake thorough research to search for a new lender. People need to check the interest rates they offer, processing fees, and other charges if any, before deciding on a lender. 

Step 3: Check eligibility criteria and prepare documents 

Borrowers need to check the eligibility criteria of the new lender and check if they can fulfil them. If there are any issues, they should discuss them with the lender’s representatives. Going through the list of documents required and keeping them ready is another important step. 

Step 4: Contact the current lender 

After deciding to opt for a car loan balance transfer, the borrower needs to contact their current lender to initiate the process. They can go to the existing lender’s official website or net banking app to check the terms and conditions and fill out the forms for foreclosure.

People can avail of car loan balance transfers for used car loans as well. For more details, they must contact their bank/NBFC. 

Eligibility criteria for car loan balance transfer 

Borrowers need to remember that car loan balance transfer eligibility, including car top-up loan interest rates, will vary from one lender to another. It is important to carefully review the terms and conditions of each lender to understand the specific requirements and interest rates associated with a car top-up loan. By comparing multiple lenders, borrowers can find the best car top-up loan interest rate that suits their financial situation and requirements. But, generally, they are as follows: 

  • The applicant must be an Indian resident
  • The borrower’s age must be between 21 and 70 years
  • Salaried employees must have a minimum of 1 year of working experience 
  • Self-employed individuals must have submitted their Income Tax Returns (ITR) for the previous 2 years

Documents required for car loan balance transfer 

While every lender has their own list of documents needed for a car loan balance transfer, people should keep the following documents ready: 

  • For KYC- Aadhaar card, voter ID card, passport or PAN card
  • ID card issued by the employer (for salaried individuals)
  • Salary slips for the previous 3 months 
  • Bank statement for the previous 3 months 
  • Insurance copy and car registration certificate 

Things to consider before a car loan balance transfer 

Listed below are some of the factors to consider before applying for a balance transfer: 

  • Borrowers must calculate the transfer cost, foreclosure charges and overall profit they’ll gain from the balance transfer 
  • It is important to take into account the additional charges levied by the new lender 
  • Borrowers should ensure they have a high credit score because it’ll expedite the process greatly

Before applying for a car loan balance transfer, it will be helpful if borrowers go through this guide and research thoroughly on whether it’ll be helpful for them. 

 

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