Home Loan Transfer is Good or Bad?

by Editor May 7, 2023

Home Loan Transfer: Due to busy schedules, it is common to overlook checking bank loan statements. However, it is important to regularly review your loan statements, especially for a long-term loan like a home loan.

Many people in India continue paying EMIs for several years without realizing the actual progress they have made towards paying off the loan.

It is only when they take a closer look at their statements that they realize that they have paid only a small portion of the principal loan amount, with the majority of payments going towards the interest.

Many people are so busy with their schedules that they do not find time to check their bank loan statements.

In India, it is common for people to keep paying EMIs for four to five years after taking a home loan, only to realize later that they have barely made a dent in the principal amount apart from the interest.

Shocked by this realization, they often rush to other banks in the hope of transferring their loan, hoping for a lower interest rate and faster repayment.

However, it is important to consider whether it is the right time to transfer the loan and whether it will be beneficial or not.

Transferring your home loan to another bank may seem tempting due to the lower interest rates, especially when you have taken a loan for 15-20 years.

However, you should not make a decision solely based on interest rates when considering home loan transfer.

1. Interest Rates

If your bank denies lowering the interest rate despite the falling rates, you may consider transferring your loan to another bank. However, it’s advisable to do so only if your loan amount is substantial, i.e., more than 10 lakhs.

2. If Bank is Slow in Processing

If your current bank is slow in implementing changes, it might be a good idea to transfer your loan to another bank.

For instance, let’s say your interest rate is 10% and you have taken a loan of 10 lakhs. After paying EMIs of 11 to 14 thousand, Rs. 10,000 will be deducted as interest from your account.

If the RBI suddenly lowers the interest rate to 9%, but your bank fails to update the system, you will end up paying Rs. 1000 more to the bank every month.

Therefore, in such situations, transferring your loan to another bank may be a better option.

3. No Top-up Loan

You should consider transferring your loan to another bank if your current bank does not offer the top-up loan that you are eligible for.

When Not to Transfer Loan?

It is not advisable to transfer your loan if the remaining tenure is 5 years or less. This is because the money saved due to lower interest rates may be offset by the processing fee charged by the new bank.

Additionally, you may have to go through various verification processes again, which can be time-consuming and tedious.