Five things you should know when transferring a car loan to another lender
With banks offering cars at attractive prices ready, owning a car is affordable and convenient. But what if after taking out a car loan you realize that there are better loan options? You have the option of transferring your loan to a new lender of your choice.
“This process of transferring your existing loan to another lender is called a car loan balance transfer. Each lender has different terms and conditions for such transfers. This is a simple process in which after requesting a loan transfer the new lender will wipe out your existing loan with your previous one and the EMI payment process begins with the new lender. Here are five things to keep in mind before a balance transfer, ”said Adhil Shetty, CEO of BankBazaar.com.
Check if you are eligible
The eligibility criteria for a car loan balance transfer vary from lender to lender. Check with your old and future lender to see if you qualify for the same. For example, a private lender says you can’t foreclose on the loan in the first six months. Another private lender says that you must have paid at least 11 IME on the old loan before you transfer the loan to them. You must also respect the age, income and credit score eligibility of the new lender.
Sujay Das, Chief Risk Officer, Bangalore-based MoneyTap – Fintech, said, “First, the new lender will check a few things. To begin with, he will check the condition of the car and the person’s risk profile. It will check if the borrower is eligible for a loan and look at details such as accident history, make and model of the car. “
“In addition, they will assess the declared insured value (IDV) of the car and how much the new lender will finance, followed by other factors such as the previous insurance taken out on the car and whether the installments are being paid consistently. Once the approval of the new lender is complete, the old lender will issue a foreclosure letter stating that the loan is closed with them, ”Das said.
Lower borrowing costs are the main reason most people transfer loans. Therefore, calculate what you have to gain from the transfer. “Take your Equivalent Monthly Income (EMI) and multiply with it the number of months remaining in your loan term. For example, you have 48 months left with each EMI value. ₹5000, so you have to pay ₹2.4 lakh. Next, figure out what you’ll pay the new lender – the total amount of EMIs on the new loan, processing fees, pre-closing fees on the old loan, and all applicable fees and taxes. If you save a lot of money on ₹2.4 lakh, you should consider the transfer, ”explained Shetty.
Evaluate the quality of service
Beyond the loan costs, also assess the quality of service your new lender will provide you. This is also an important reason for loan transfers. Auto loans are a long term commitment, so you should go to a lender whose service you are happy with.
Know the interest rates and eligibility
This continues from the points on borrowing costs and your loan eligibility. Shetty said, “Normally lenders have a range of interest rates. The lower rates are reserved for customers with a good income profile and a good credit rating, while others may have to pay a higher interest rate. Before applying for a loan, know your credit score. If it’s low – say, below 700 – work on improving it so that it’s above 750 and you can get the best loan deals. “
Documents required for an auto credit transfer
In order for your car loan to transfer smoothly, you need to submit a loan statement from your current lender with details of the outstanding amount of principal and interest, term, etc. In addition, you will also need to provide all the necessary documents to apply for a new loan like ID, proof of address, salary slips, bank statement, PAN card, etc. Once the transfer is complete, be sure to collect a non-assessment letter from your first lender.
“You will need a letter of no objection (NOC) from the previous bank. You will also need to check with the new lender if another additional AC from RTO is also required and ensure that the mortgage passes from the old lender to the new lender, ”Das said.
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