Credit is a very useful tool but must be used with great care and discipline. You must repay the money and the interest if you take a loan. When you avail of a loan, you are liable to pay a monthly EMI, the total portion of the principal, and the goods. However, this interest differs from lender to lender, and another might offer a much lower interest rate than your current lender. In such a case, you might want to switch your loan lender as that will reduce your interest payouts and the EMI burden. You can also opt for an online loan app to pay off your existing personal loan debt that’s charging a higher interest rate.
It is important to realize the basic concept of switching lenders for your loan. Let’s understand this with an example. Suppose you took a loan at a higher interest rate during an emergency. Or you took multiple loans at different times for different reasons. But now, the overall EMI from all the loan accounts has become too much for you to pay. You can avail of a new loan from an instant loan app, where you get an attractive interest rate and use the money from this new loan to pay off all the previous loan(s). This way, you can reduce your monthly EMI burden. It can also help reduce the overall amount you will be paying for the duration of the loan.
However, there are multiple factors that you must consider precisely before switching your loan lender. Changing a loan involves several costs, and switching might sometimes be a costlier expense than continuing with your existing lender.
Read on to understand the important terms and conditions of switching a personal loan.
When should you switch personal loan lenders?
At first, switching a loan might seem like work for too few benefits. However, in certain circumstances changing your loan lender might be a smart move that can help you save on the loan interest. Here are some situations when you can consider switching your loan to an online loan app.
When you are paying extremely high-interest rates already
People often do not spare enough time to get the best deals on interest rates. As such, they end up borrowing money at very high-interest rates. Other times, their loan eligibility might be affected by several parameters like credit score, monthly income, or employment status. With time, these parameters might also improve, making you eligible for a better interest rate.
You can check out the loan offers on an instant loan app and go for the one that best suits your needs. Some loan apps also provide discounts for processing fees and other charges, which could make your loan transfer process even more affordable. In such cases, you can consider switching your existing personal loan to a new lender. In such cases, you can consider changing your existing personal loan to a new lender. In such cases, you can consider changing your existing personal loan to a new lender.
When there is imminent income reduction
People in business or salaried jobs often find that they are staring at income reduction because of lower demand, salary cuts from the employer side, reduced profit margins because of new competitors entering the market, or a shift in direction. In such cases, the person needs to reduce their monthly money outflow. Switching your loan to a lower-interest lender can help lower your monthly EMI burden.
While switching your existing loan to a new lender, you can also negotiate the terms and tenure of your loan. If your existing EMI burden is too high to accommodate in your current salary, then opting for a longer tenure can help bring down this EMI amount. However, be very calculative with this move, as a longer tenure would mean higher interest payouts.
When you are unable to afford your current liabilities:
You might often have to opt for a personal loan for emergency reasons. This can be completely unforeseen and may increase your overall loan burden, especially if you have existing loans. In such a scenario opting for a loan switch can help you consolidate all your loans into one single loan account. Check out an online loan app to get better interest rates. This can help you save big time on your loan interest.
When you are getting an attractive low, interest rate deal
If you have already availed of a personal loan, then keep a tab on the interest rate fluctuations in the market. Sometimes, the interest rates might come down due to market fluctuation. In such a situation, switching your loan rather than continuing it with your existing lender at a high-interest rate makes complete sense.
When you are unsatisfied with your lender’s customer service
You can also consider switching your loan to an online loan app if you are unsatisfied with your existing lender’s services. With an instant loan app, you enjoy full transparency as all your loan details are easily available on the app. You also get customer support anytime through online calls. Many traditional lenders do not provide such services. You must wait an hour to get through their toll-free number or visit the branch personally.
When you get greater features from the new lender
You might be eligible for better loan terms depending on your repayment record, credit score, increased income, and other factors. Some lenders may provide you with a loan transfer with zero processing fees, a lower rate of interest, a waiver of the last EMI, and so on. Thus, a personal loan balance transfer reduces your interest burden and offers better loan features.
Considerations for choosing the new lender
It would be best if you did a lot of due diligence before you move to a new lender. At the very least, you must ensure that:
- The interest rate should be lower by at least 0.5 to 1 %. Also, ensure thaensureal cost of interest payout is less than the transfer cost remedy is important if you are moving to one loan from multiple loans. After all, moving from one high-interest loan to another is no point.
- The loan duration should not be exceptionally long: Do not switch if the new loan is too long. You will not only end up paying more money but also have to worry about the EMIs for much longer.
- The process should be simple enough: Finally, the process must also be very simple. There is no point in putting in a lot of effort if the gains are minimal.
There are many ways in which you can benefit by switching to a low-cost lender. First and fore, you will end up paying lesser money because of the low-interest rate. Next, it allows you to cut your fixed costs and live with lower income and expenses. Third, it will enable you to get your finances back in control and become more financially disciplined. Last but not least, you can start to save money for the future, which you would have otherwise paid in debt repayment.