Two-wheeler Loan Transfer: Know Everything About Its Process
Article by Drivio | 12th Apr 23
Do you ever wish that you got your two-wheeler loan from a different lender? You’re not alone – individuals taking personal loans often discover later that a different bank or NBFC offers a lower interest rate. Thankfully, you can transfer your loan to a different lender and the loan transfer process isn’t too complicated.
Transferring a loan can offer several perks, the primary one usually being a lower interest rate. If you’re thinking about switching to a different lender but aren’t sure how to go about it, this article is for you. Read on for a thorough walkthrough of the loan transfer process.
How does a loan transfer work?
Let’s first get a quick understanding of what exactly a loan transfer is and how it works. To put it simply, it’s the process of transferring your outstanding loan from your current lender to another. The new bank or NBFC of your choice pays off your existing loan with the current lender. Thus, you’d be making the remaining instalments of repayment to the new lender after the transfer.
Are there any additional costs associated with a two-wheeler loan transfer?
Transferring your two-wheeler loan to a different NBFC or bank requires you to pay the new lender a certain amount of money as a processing fee for the loan transfer. However, the fee might be nominal compared to the amount you’d save by transferring the loan, assuming that the new lender offers a cheaper interest rate.
In case your loan comes with an applicable prepayment cause, make sure to factor it in. Loan providers often charge a penalty of one to three months’ worth of the monthly repayment amount if you pay off the loan too early.
How to transfer a two-wheeler loan?
As mentioned earlier, the loan switch process is quite simple. Here’s a step-by-step guide on how to go about it.
Step 1: Find relevant lender information
First, visit the website of the financial organization you wish to transfer your loan to and go through all the relevant information regarding two-wheeler loans. Check out their loan interest rate, associated processing fee, and terms and conditions. If you haven’t decided on your new lender already, compare your options to find the best one.
Step 2: Apply for the transfer
Once you finalize your new lender, navigate to the respective page and apply for a two-wheeler loan transfer. You’ll have to fill in various details regarding your existing loan, your current lender, and the vehicle.
Step 3: Wait for a loan offer
After applying, wait to receive a loan offer from the new lender. If you’re okay with the offer and wish to proceed, accept it and pay the transfer fee and other associated charges. You’ll then be required to upload your demographic documents, income proof, and vehicle documents.
Step 4: Inform your current lender
While you wait for approval again after accepting the loan offer, contact your existing bank or NBFC and inform them that you’re switching to a different lender. You’ll have to collect all the important documents held by your current lender, as well as a consent letter. The letter must specify your vehicle details and the outstanding loan amount.
Step 5: Foreclose the existing loan account
Your new lender now needs to pay off the existing loan account for its foreclosure. They will do it once they receive the previously mentioned consent letter from your current lender. Your old loan account will now get closed permanently, and the new lender will get possession of the necessary documents.
Step 6: Sign a new loan agreement
Finally, it’s time to sign a loan agreement with your new lender. The agreement would mention all the terms and conditions of the loan, including the interest rate, the remaining loan amount, and the repayment tenure. Make sure to go through them thoroughly before you sign the agreement.
Reasons to go for a loan transfer
Not sure if you should transfer your loan to a different lender or if you’d really benefit from the transfer? Here are a few reasons why you might want to consider transferring it.
Lower interest rate
As mentioned earlier, this is the most common reason why one would go for a loan transfer. There’s no reason to keep paying your current lender at the existing interest rate if you can save money by switching to a lender that offers a cheaper rate.
Better customer service
Poor customer service from your lender can be a nightmare if you need any assistance or run into any issues with your loan. In such cases, it’s worth switching to a lender with better customer service despite the associated fees.
Changing the loan tenure
You may renegotiate the tenure of the loan when transferring it to a new lender. This means you may extend the loan tenure if you can’t pay it off at the current tenure with your existing lender. On the other hand, you may also shorten the tenure to save money on interest.
Attractive benefits offered by a different lender are a valid reason to transfer your loan to them too. For instance, some lenders offer a top-up facility – additional funds at a lower interest rate than usual. Some might waive the processing fees or your last EMI too.
Refinancing vs. loan transfer: Which one is better?
In case the existing loan tenure isn’t sufficient and you need longer to repay it, you might be trying to decide between a loan refinancing and a loan transfer. Both are viable, but refinancing is only a good option in the early stages of your loan tenure, when you have the highest interest component and prepayment penalty. Otherwise, it might be more cost-effective to transfer your loan to a lender with a lower interest rate and better perks.
Whether you want to transfer to a new lender for cost-benefits or better customer service, make sure to research your options well. Explore the best bank and NBFCs in your region that offer a two-wheeler loan transfer facility and pick the one that works the best for your needs.