What is a Loan Balance Transfer?
A Balance Transfer allows you to move your outstanding loan principal from your current bank to a new lender offering a lower interest rate. It is most commonly used for long-term debt like Home Loans, where even a small reduction in the interest rate can result in massive savings over the tenure.
How It Works
The calculator compares two scenarios:
- Continuing with your existing lender at the current interest rate for the remaining tenure.
- Transferring the exact outstanding principal to a new lender at a lower interest rate.
The difference in total interest paid across these two scenarios is your Gross Saving.
Hidden Costs of Transferring
Banks charge processing fees, legal fees, and valuation charges for transferring a loan. You must subtract these costs from your gross savings to determine if the transfer is actually profitable. If the net savings are minimal, it may not be worth the administrative hassle.