Shatanu Das had been living a life of gaiety as a bachelor. He had often harped on his culinary skills at work. Still he was instantly nervous when his boss announced that it was time to test his skills and that Das must host a team’s dinner at his home on the coming weekend. Das was confident his long overdue promotion would be sealed with his all-time hit “Macher Jhol” and “Mishti Doi”.
But his nervousness emanated from the fact that his house was a clean slate. He had no idea where his guests would sit and where will he serve them. Till now he had only cooked for himself. But this was a different affair. He had to make an impression. Next morning, he prepared an ingredients list and the first thing he wrote was “take a personal loan to buy furniture and kitchen ware”.
Believe it or not, it was brash on Das’s part to take a personal loan at that time. It was only a matter of one dinner and he spent a bomb on giving his rented apartment a new look. He hurriedly ordered all sorts of home décor stuff from furnishings to kitchen appliances; things he had hardly bothered about earlier.
Everything happened so quickly that he took a personal loan of Rs. 1,50,000/- to pay for everything. It wasn’t really an emergency but he had to impress his boss and colleagues and he was given short notice. He didn’t think twice when his bank charged him 20% interest, as he needed the funds soon.
One year into the loan and he had already realised his mistake. He could feel the pinch of the EMI and he didn’t know how he was going to keep paying it off for the rest two years.
Along came an offer from HDFC Personal Loan department for a new personal loan at 14%. Das jumped over the moon. But then he wondered whether it was possible to transfer his personal loan to another bank and what would be its implications.
What is Personal Loan Refinancing?
Personal loan refinancing is like transferring outstanding personal loan balance with one bank to another. In other words, a lender takes over an existing loan with another lending institution. The transfer is a simple process. You take a loan from the new lender and pay off the old one. This way you have a new institution you owe your debt to and possibly a new lower EMI every month.
The customer usually benefits because of relaxed terms. But is it always the best thing to shift? Well, here are 5 gripping points you must consider before you take another step forward.
Implications of a PL Balance Transfer
Given the staunch competition between lenders, he believed it would help him negotiate a lower interest and perhaps, a lower processing fee as well. He matched various offers and didn’t to bargain.
But in the digital world, these are trivial factors. His existing bank, ICICI, was not willing to match HDFC’s rate. The best they offered was 16.5%. Das wanted to shift to HDFC but he wasn’t sure if the service would be as commendable. What if he regretted the idea later?
Commercial banks and financial institutions in India mostly provide at par services, due to the competitive set up of the industry. While one could be very happy with one bank but if there is an opportunity to save money then service shouldn’t be made an issue, unless the terms of the loan are stricter.
Das always thanked HDFC for offering a PL at a lower rate because that helped him negotiate a lower rate with ICICI. His new EMI was lower and he finally wasn’t feeling stifled.
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