Refinancing Loans ? Significant Considerations.

Posted by Anurag Mishra on April 5th, 2017

Are you completely happy and fulfilled with the recent loan that you have?

Do you wish to improve your present loan? Do you find the property loan interest rate too much or the benefits too less? Do you wish to enjoy more funds, but your principal bank isn’t really complying? Would your life become easier and simpler, should your loan tenure were to boost?

If yes, Refinancing or Balance Transfer Top-Up is the best answer available for you.

What is Refinancing?

Refinancing loans of any nature are an outstanding option available for smart borrowers. It typically means uneven an existing loan with a new one under different terms to decrease risks and enjoy more benefits. With this, borrowers can with no trouble improve the terms and property loan interest rate of the loan.

The Indian financial sector has witnessed a number of loan takeovers by diverse financial institutions. Various schemes are often rolled out by banks to entice clients with good repayment history. They offer better loan amount as well as a lower rate of property loan interest rate and longer tenure to stand out in the competition.

If the idea of a loan transfer is making you curious now, then the following discussion would be significant for you Of course, it has to be a well considered decision as you don’t want to switch without knowing the complete picture.

Why Balance Transfer or Refinancing is a Good Option?

Although, there can be lots of reasons to choose for refinancing, we have compiled underneath some key cases wherein you might want to choose for it.

  •         To get improved your existing debt for business growth or other personal reasons and           your principal bank isn’t ready to provide the funds you need.
  •         To reduce the existing and oftentimes longer tenures.
  •         To significantly reduce the monthly EMI payments.
  •         To enjoy a reduced rate of property loan interest rate.
  •         To consolidate expensive loans or debts into one.

Things to think Before Refinancing Your Existing Loans

Have a look at some vital tips that you must examine before transferring your existing loan to a different bank.

Calculate Benefits vs. Costs

It is not essential that you will forever benefit from refinancing. Carefully calculate the amount you will save by refinancing your existing loan.

Factor in the penalty plus service tax since you are closing your existing loan without completing the tenure.

Be careful of Heavy Mortgage Charges

You will require mortgaging your assets for refinancing as a security, particularly for home loans or Loan against Property. Although home loans are by defaulting exempted from exit penalties, you still need to issue in the new mortgage charges.

Identify the correct refinancing option with lower mortgage charges. In a healthy scenario, you should be able to recover the costs of switching loans within 2 years.

Rate of Interest

The Interest rate is the vital aspect to recognize and choose a better refinancing option.

It is sensible to choose for refinancing only if the difference between your current interest rate and refinancing interest rate is at least 0.75 – 1.00 %, as well enhancing the present debate. This is because many banks charge exit fee for terminating the existing loan, and in that case you may end up paying more than you gain by interest difference.


If you want lesser tenure, decide a higher EMI refinancing option and if you need lower EMI payments, opt for higher loan tenure. This relation between tenure and EMI is always inversely proportional.

If you have a rise in your income and want to repay your loan sooner, but your existing bank is not approving on restriction the tenure, then refinancing may help you a great deal.

Evaluate Loan Amount

When opting for refinancing, know that only the outstanding principal is transferred. Hence, you need to evaluate the outstanding amount of loan and property loan interest rate paid till now.

Refinancing loans can be fairly risky for those with bad credit history.

Refinancing can be availed on any loan type, including home loan, car loan, and LAP. If you have a brilliant credit history, you can with no trouble apply for refinancing or loan top up.

It is sensible to look at all factors previously to allowing for refinancing, and if you feel that it’s an improved deal in the long run, and then goes for it.


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Anurag Mishra

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Anurag Mishra
Joined: December 13th, 2016
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