In an effort to gain business, banks and finance companies offer lower interest rates. However, before you do a loan takeover from one bank to another, you need to consider other aspects as well. It is also important to compare loans offering low interest rates from different financial institutions by using personal loan eligibility checks online.
Listed below are six important points to consider before loan takeover
- Estimate the total outflow
Even though the new bank may lower your monthly EMI and extend your personal loan repayment period to entice you. You need to be aware that such benefits will increase your overall payments to the bank because accrued interest will remain on the outstanding amount. Therefore, if your present bank has higher EMIs, evaluate the total outgoing for both banks before deciding.
- Examine the processing charges and other related fees
Consider the stamp duty, processing fee, technical fees, valuation fees, legal fees, and other fees that your new bank will impose, and weigh them against the benefit of lower interest rates. The amount you pay depends on your employment status or whether you own a business. Some banks charge a percentage of your loan amount. Others have a set amount that is the same for everyone.
- Ratio of outstanding loans to collateral
If you’ve previously paid off a significant portion of your loan, don’t provide the entire original collateral to your new bank for loan takeover. If the necessity arises, you would utilize it to take out a second loan. Reduce the amount of collateral you offer your new bank. If the bank continues to refuse, try to get the interest rate reduced even more.
- Benefits and charges of allied accounts
Most banks ask you to open a savings account and deposit your funds there when you take out a loan. If this is the case, learn about the fees that will be charged and the services provided to you. Before making a final decision on a loan takeover, you should consider such provisions and your needs. Also, if you conduct all of your banking with your present bank, you become a premium customer for them; you know a lot of their employees, are familiar with their procedures, and may be given services faster than others in the line. These softer banking components go a long way toward ease of use and comfort and should be considered before ignoring them.
- Read Terms and conditions carefully
All terms and conditions of both banks must be read before you sign anything. Some banks require you to buy insurance from specific companies or deposit a certain amount in fixed deposits or open a number of accounts for yourself and your family, etc. Understand the pros and cons of the conditions outlined in the sanctions letter’s “terms and conditions” section.
- Attached frills are available as well
Offering frills with loan takeover to attract customers is a craze. The list of offers is topped by a free credit card and personal accident insurance. Before you fall for these, consider whether you need them and inquire about the terms and conditions that govern them.