Balance transfer is a process by which a borrower transfers an outstanding principal of a personal loan from one lender to another in order to benefit from better terms such as a lower interest rate on the outstanding loan. Many NBFCs (non-banking financial companies) and banks now provide the option of a balance transfer on personal loans. However, one needs to carefully evaluate the balance transfer offer and choose the one that helps reduce the cost of borrowing.
Personal loan balance transfers do not require any collateral from the borrower. However, the current lender may charge some foreclosure charges, and the new lender would charge some processing fee along with stamp duty for the loan agreement, in case applicable. Include these costs too, while evaluating the best balance transfer offer.