Hold up balance transfer transactions are despairing the home loan borrowers


The banks have started lending new home loans at lower interest rates charging 6.5%-7% onwards. In this context, the existing borrowers are given the chance to switch their balance loan to another lender who is willing to offer lower interest rates. Most of those transactions are however stuck as banks and non-banking financial institutions(NBFCs) are processing with limited staff.

Switching process

For switching lenders, the borrower has to first obtain a sanction letter from the financial institution where the loan will be transferred. To further process the transfer request the financial institution require additional documents such as copies of the loan account statement, foreclosure letter, and other property-related documents that are with the existing lender.

The new lender will then issue a cheque in the name of the existing lender. On receipt of the cheque, the existing lender will hand over all the documents and closes the account. It may take up to 6-8 weeks to complete all the procedures.

Due to the pandemic, the offices are expected to work only with 10% of their regular staff. The limited staff availability in banks and NBFCs made the home loan balance transfer requests slow. Also, many of the field staff who are coming from tier I and tier II cities depend on public transport for their work and many went back to their hometowns due to the lockdown, which further slow downed the loan application process and other requests.

Benefit of Switching

Consider the case of a borrower who has an outstanding loan of ₹50 lakh at an interest rate of 7.4% with a remaining tenure of 15 years. If a new lender offers him 50 basis points lower interest rates, he saves ₹2.53 lakh in interest outflow. Also, the EMI for the new loan will come down to ₹44,663 from the existing ₹46,067.

The best way for home loan borrowers is to go online to know more about the offers being provided by the varied lenders. Several online portals provide a summarized view of the rate of interest, fee, and other charges of different lenders. Keeping an eye fixed on the interest rates will also benefit the existing borrowers to switch their lender if there exist any large gap between what he/she is paying and what the market is charging

 Hence, before availing a home loan, do your research to confirm you get the most effective deal.


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