How to Use a Personal Loan Balance Transfer Calculator for Better Financial Decisions?
Taking out a personal loan can provide funds when you need them. But over time, interest rates and financial situations change. This is where a personal loan balance transfer comes in handy. Transferring an existing personal loan balance to a new loan with better terms can optimise your repayment and savings. A balance transfer calculator lets you evaluate the numbers and make informed decisions. Read on to understand how a balance transfer calculator can lead to better financial choices.
What is a Personal Loan Balance Transfer?
A personal loan balance transfer involves moving the outstanding balance from an existing personal loan to a new loan offered by a different lender. The key benefit is that the new lender provides more favourable interest rates or terms on the remaining loan amount. This directly lowers the total repayment burden, saving the borrower money.
For example, Raj took a personal loan of ₹5 lakhs from Lender A at 11.5% annual interest for a 5-year tenure. After 2 years, his outstanding principal is ₹3 lakhs. Now, Lender B offers Raj a personal loan balance transfer at 9.5% annual interest. Opting for this can potentially save Raj thousands in interest payments.
Why Consider a Personal Loan Balance Transfer?
There are a few key reasons why borrowers consider transferring their existing personal loan balance:
- To save on interest costs due to lower rates
- To extend or shorten their loan tenure
- Due to changed financial circumstances
- To access better features like processing fee waivers or loan top-ups
The proper balance transfer of personal loan results in lower EMIs, faster debt repayment, and overall interest savings. Carefully examining the numbers on a balance transfer calculator indicates exactly how much benefit the move would provide.
How does a Personal Loan Balance Transfer Calculator Help?
A personal loan balance transfer calculator can help you estimate how much you might save on interest by transferring an existing loan to a new loan with better terms.
1. Estimates New EMIs Accurately
The main use of a balance transfer calculator is to provide the revised EMIs you need to pay if you opt for the new loan. It adjusts the outstanding principal, interest rate, tenure, fees, and taxes to give you this exact EMI figure. This allows for an informed comparison to your current EMIs.
2. Calculates Total Savings
A good balance transfer calculator shows the overall interest payable across both loans. You can then clearly view the total savings you stand to make from the balance transfer of your personal loan. Seeing tangible savings motivates smarter borrowing decisions.
3. Checks Viability Based on Income
The calculator also lets you input your monthly income. You can then assess if the new EMIs fit your budget reliably. This prevents taking on repayment burdens beyond your means.
4. Provides Amortisation Schedule
Amortisation schedules break down EMIs into principal and interest components. This clarifies how much of your payment goes towards reducing the loan, which is useful when comparing repayment structures.
5. Allows Customisations
Playing around with different loan amounts, tenures, interest rates, etc., gives you a range of scenarios. You can model balance transfers to suit your requirements before applying for a new loan.
Using a Personal Loan Balance Transfer Calculator
Follow these steps to use a personal loan balance transfer calculator effectively:
1. Enter Current Loan Details
To start, please fill in the details of your existing personal loan, such as the amount, rate of interest, tenure, and bank name.
2. Input New Offer Details
Next, enter the details of the bank’s new balance transfer offer, including the interest rate and processing fees they propose.
3. Review New EMI
The calculator displays your revised EMI under the new proposed loan. Compare this with your current EMI to gauge the benefit.
4. Check Total Savings
It also shows the total interest payable on both loans. The difference is your savings from opting for the balance transfer.
5. See Amortisation Schedule
There is also an amortisation table comparing both loans for better clarity on repayment structure.
Use the customisation options to model the best financial scenario. Evaluate optimal loan amounts, tenures, and interest rates.
Conclusion
When you use a personal loan balance transfer and check the EMI calculator, it clearly shows you all the details. This helps you make smart decisions about how to pay back your loans. The calculator gives you the information you need to find ways to save money and pay off your debts faster with confidence.
