When buying a car there are various ways to finance it. One popular way of financing your car purchase is using a car loan facility. A car loan facility is not only available from banks but also non-banking finance companies (NBFCs) .
But it may so happen that after availing the car loan, you may realise there are better options available. What next? Can you change your loan provider midway into paying your EMIs? Well, yes. You have the option to change your loan provider during the loan’s repayment tenure. This process is termed as transferring your loan from one lender to another lender. The terms of each lender may differ, thus it is advisable to read and familiarise yourself with the terms and conditions.
Here we list down five such things that you should know about changing your car finance provider.
#1 Check your eligibility
The first and foremost step is to check the car loan eligibility. This criterion varies among different lenders and thus you need to check whether you qualify for such a transfer with both, your present as well as the future lender. Some financers may require you to complete a tenure of at least six months before foreclosure. On the other hand, a lender may require you to serve at least 11 EMIs before the transfer.
#2 Calculate the cost of the transfer
The cost of transfer from one lender to another must be considered when switching your car loan. Take into account the balance amount due towards your loan, any charges for pre-closure with the old lender, and processing fees charged by the new lender. If there are any significant savings, then it is prudent to make the transfer. You can make use of a car loan EMI calculator that also helps to compute these additional charges that are otherwise mentioned in the terms of the loan agreement.
#3 Assessment of quality of service
Other than the lending cost and charges of transfer, look into the quality of service the new lender will provide. Not all loan transfers are done with the motive of saving costs; some transfers are done to get better quality of services. Since these car loans are medium to long-term commitments, having a better quality of service by the lender can aid in a smooth settlement.
#4 Confirm the interest rate and its eligibility
Continuing the discussion of the cost of transfer, financial institutions have a range of interest rates offered based on your credit profile. A lower interest rate is charged for individuals with higher credit ratings and a good income profile whereas the others are required to pay slightly higher interest rates.
#5 Documentation
When transferring your loan, make sure to know about the documentation process. Adequate details need to be furnished from your old lender to the new one. This includes details about the outstanding principal, interest paid, and more. Furthermore, at the time of transfer, you need to furnish all the documents like address proof, identity proof, income proof, etc just as in the case of a fresh loan.
These are some nifty tips to remember when transferring your loan from one lender to another. With digitisation across the financial sector, you can now avail and transfer a car loan online itselffor a hassle-free financing option.
