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05 April 2011

Is it Worth To Shift Your Home Loan?

Home loans are available at a certain rate of interest. Borrowers have many options to choose from as many government as well as priavate and nationalised banks offer money as loans. Taking a home loan is one thing and repaying it is another. With so many fluctuations in the market and financial ups and downs one is at a question to assess the home loans from time to time. If the EMIs start getting bigger than expected it is obvious that the lender has increased interest rate on terms of fluctuation interest rate clause. Is it then that one is stuck up with the existing home loan?
There is always an option termed as loan shifting.  As the term suggests the borrower can shift the existing loan at any given time for better prospects and interest rates. When the borrower goes in for a home loan he selects the best loan available from many options available according to his financial loan repayment capacity and financial posisiton. If there is unreasonable increase in the  EMI and the client finds another loan lender company that will offer the same amount on lower interest and attractive package then the borrowwer can think of loan shifting. This will come at a price and the first lending institution will charge a penalty fees which may amount to say from 0.5% till 1%. Also consider that all these processing and administrative work will take some time. So apply for loan shifting before beginning on the new home loan. Other wise you may end up in a mess as existing EMIs will be cut regularly and a fresh loan will add up to your worries in terms of interest. It is always understood that new lending institution will be in hurry to offer loan and the first lender will be reluctant to let go of the borrower and customer.
Some times if you are lucky you can also quoite the amount available at the lower interest rate from the new lender to the previous lender and in some cases they do adjust the EMIs in fear of losing a customer, or precious finance. This will help you to avoid all the administrative hassles and also get you to repay the remaining loan at a new and lower interest rate.
The important questions for any borrower before shifting your home loan are as follows:
1) Has your EMI increased at an unreasonable rate?
2) Do you know of better options and loan amount available at lower interest rate?
3) How much fees or penalty will the lender charge for closing off the home loan?
4) How much will you pay as administartive charges to the new lender for getting a loan?
5) Will you get the remaining amount as new loan at your existing financial position?
6) How much time and effort is required from your part? and can you afford it?
7) Is there a possibility to consult with your existing lender and come up with negotiations?
8) How much money will you save in total? is it worth the effort you will put up for loan shifting?
9) Finally how will the new lender progress over the years? you can consult friends and relatives to find out about this aspect.
Consider all aspects regarding loan shifting before  the final step other wise you may end up paying the same amount as EMI as you were previously paying , but just after a few more months!

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