Compare the Total Outflow
While a new bank can draw you by its side by offering reduced EMIs and elongating the time period of your loan repayment, you should be aware that this can increase the total amount you are to pay in the end due to the constant addition of interest rates to your outstanding loan amount. If your current EMI is higher than what the new bank offers, you must compare the total outflow of the two banks before you shift. Unless you’re struggling to pay your current EMI, it is not advisable to shift banks just for the reduced interest rates.
Be Sure to Negotiate
If you don’t want to be dictated by the terms of your new bank, even though you find some of the aspects of its offer to be attractive, be sure to negotiate. Negotiation can take you away from being at the mercy of your lender and can even give you an upper hand. Banks don’t want to lose their borrowers, especially if they have a clean record in repaying the loans on time. So more often than not, your negotiation will be taken into consideration by the bank.
Switch at the Right Time
In general, your EMI is structured in a way that you pay the interest component first and then your principal component. So if you make a switch at the start of your loan period, you will pay a higher amount to the interest component, whereas if you switch at the end, you will pay a higher amount to the principal component. If the new bank has attractive interest rates, you get maximum benefits by switching during the initial period. Timing the switch properly can save you a lot of money.
Pay Attention to Terms and Conditions
Whenever you’re switching to a new bank, it is very important that you thoroughly read the terms and conditions of both your old and new banks. Some banks can have conditions like buying insurance from a specific company or other such terms. Acquire complete knowledge before signing the document.
Know the Allied Charges
Especially with home loans, you must know that transferring your loan comes with charges like processing fee, stamp duty, legal charges, technical charges, valuation fee, and more. You must take all of these into account and see if the offer of the new bank is worth.