Home loan balance transfer on the face of it looks like a simple loan transfer. But it is not as simple as it seems, simply because the stakes involved are higher.

If interest on loan is fixed between two and five years, consumers whose loan is in the fixed time frame may not be able to enjoy benefits of loan transfer. When once it gets to floating rate, and if the interest is higher than the prevailing rate, it makes sense to transfer.

The process:

> Request a letter to your existing lender that you are considering a loan transfer.

> Your lender will issue a letter stating the outstanding amount.

> The new lender (the bank which is taking over your loan) will require the outstanding amount along with a photocopy of your house documents for the processing of your loan.

> Processing of your loan includes credit score analysis, savings bank account verification and others.

> If all the verification process is in order, the new lender will issue a cheque to close the previous loan account.

> After you submit the cheque to close the previous loan account, your previous lender, it takes about 10-15 working days to release the original documents of your house.

> Its important to understand that the Reserve Bank of India, the governing body of all banks in India has banned prepayment penalty. But some banks still have foreclosure charges which range between 0.5 and 2% of your loan outstanding. Negotiate with your bank, it could reduce your foreclosure charges.

> When once you receive the original documents, you need to submit it to your new lender. You will receive a letter stating that the bank has received a list of documents in original.

> Do not forget to collect a loan closure letter from your previous lender.

Things to keep in mind:

> Do balance transfer of a loan early in the loan tenure. Because in the initial years the majority of your EMI payment goes towards interest.

> Try to negotiate with your existing lender before you transfer your loan. The bank might reduce your interest rates.

> If you have been irregular with your EMI, no new lender may want to take over your loan.

(Contributed by Rajiv Raj, director and co-founder at Creditvidya.com)