Bank loans – Human life is always amidst constant changes. Whenever we find something that affects us mentally,
financially or physically, we start exploring alternative solutions that suit us best. There is nothing wrong
in choosing a better option that will enhance our life and take us to the next level. Especially financial
part of our life requires some effective changes now and then. Deposit and availing bank loans includes many
researches and considerations.
Availing loan is one of the trickiest processes where we concentrate on total amount that can be availed,
EMIs and the tenure period that the bank offers. In general we opt for the bank that offers the lowest
interest rate and maximum amount according to our income package. After all such deep analyses, we
avail the loan and we are on the proper track of paying EMIs and maintaining records.
Here comes the twist. After a few days/month, we hear that a so called bank offers an interest rate for
home loan that is lower than our choice and also some other advantages that are not being provided by
the bank to which we have applied for loan. Do you think there is an opportunity for changing your
home loan from one bank to another? If it is yes, do you still doubt whether the current lender bank will
allow you to migrate when already some EMIs have been paid?
Yes, we have options to switch over our home loan from one bank to another, so that our financial
interests are better served. This includes both pros and cons where it is very important to think a lot
before stepping forward in switching the loan. Let us make a checklist first to understand the
importance of switching over home loan from one bank to another.
Note: Remember that switching over home loan from one bank to another will be accepted only when
we have proper record of EMI payment receipts and all required details should be reliable.
1. Is it necessary to switch over your home loan from one bank to another?
Analyze all the benefits of switching over to another bank and compare it with your home
existing bank loan. Never conclude to switch over with the only benefit of lower interest rate.
Switching over should not end up in any form of loss. If it becomes necessary and valuable in
switching over in considerable ways, then without any hesitation go for it.
2. Analyze the interest rate: Most of the banks announce reduction in their interest rates for loan
in the early period of the year. If you have decided to switch over you loan then avail such
offers. Some banks reduce their interest rate if the borrower has a good record of EMI
payments. If your current lender has no such options, you can switch your account and
sometimes you definitely have to. If the interest rate has much to do with your savings in
another bank, then kindly opt it.
3. EMI and Tenure period: Check whether you can increase or reduce the EMI amount in the bank
to which you are planning to switch you loan when your current bank has no options for it or
they are not ready to provide you such options. Consider the same in the total tenure period
also. It is better to switch when you have some more time in repaying your loan amount.
4. Fee/Penalty: Whenever you close your loan, the existing bank will ask you for some penalty and
the bank to which you are switching your loan will have to pay your balance loan amount to
your existing bank for which they will charge you some processing fee. Calculate penalty and
processing fee amount and check whether it is worth in switching over your loan or not. It is a
general penalty within a range of 0.5 to 1.5% and even more. It depends totally upon the banks’
5. Bank history: It is an important point in your check list to check whether the bank to which you
are going to switch your loan is a renowned banker. They should be either a central or state
government financial organization or they should be under the laws and approved organization
by the government. If the bank is offering you a lower interest rate when compared to others
then analyze their history and then go for it.
1) As a borrower you have to check all the facts thoroughly before transferring your bank loan.
2) It is always better to switch the loan during the early tenure of the loan, at least before 2 years.
3) You should always take into account the processing fee, stamp duty and so on.
4) Make sure that you have gone through the complete details about teaser terms and conditions.
Ensure the time for teaser rate is short.
5) Ensure that the documents are transferred within a stipulated time frame to ensure hassle free
transfer of loan.
Finally one should not always be attracted to interest rate which is lower than the existing one. We must
understand that banks are dealing with lending. We may wonder why they would give loan at a lower
rate of interest when they are earning higher profit from other customers. So it is better to be wary and
ask questions regarding all aspects before switching over to a new lender.