How a loan balance transfer works
A balance transfer moves your existing loan's outstanding principal to a new lender offering a lower interest rate. Your new lender pays off the old one, and you continue repaying at the new, typically lower, rate — either as a reduced EMI or a shorter remaining tenure.
Worked example
On a ₹40 lakh outstanding loan with 15 years remaining, moving from 9.5% to 8.5% can save several lakhs in interest over the remaining tenure — but the actual saving needs to be weighed against processing fees and any charges from your current lender for closing the loan early.
Factors to weigh before transferring
- Rate difference — generally, a difference of 0.5% or more makes a transfer worth evaluating
- Remaining tenure — longer remaining tenures see larger absolute savings from a rate reduction
- Processing & exit charges — these reduce your net savings and should be factored in before deciding
Is a balance transfer always worth it?
Not always — it depends on the rate difference, your remaining tenure, and the transfer/exit charges involved. Our calculator gives you an indicative saving figure; a LoanGuy Fintech expert can help you factor in the charges specific to your situation.
Will my CIBIL score affect my new rate?
Yes. The new lender assesses your current CIBIL score independently, and it may qualify you for a different rate than your original loan.