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Loan Restructuring Vs Loan Transfer

Existing home loan customers will often find themselves in the situation where their existing rate of interest is higher than that prevailing in the market

There are two options that they have

1) Home Loan Transfer: Move the loan to another Bank/HFC

2) Home Loan Restructuring: Restructure the loan in the same Bank/HFC

Let’s understand these options in detail

Home Loan TransferYou are here, unhappy(8.9% to 12%)

1) Transfer Charges in new bank /HFC :

  • Processing Fee: 0 to 10k
  • EM Charges: 0 to 0.3% of loan amount LA
  • Property Insurance: Depends on size of property
  • Legal /Valuation Charges: 0 to 5k

2) Transfer charges in existing bank/ HFC:

  • 0 to 2% of loan O/S

3) Calculate Savings: Check the overall cost savings on account of loan transfer at a lower rate in our Calculators section. Click Here

4) Trade Off: Finally a call has to be taken on the basis of cost savings in the new bank, cost incurred in the process & risk of continuing with an interest rate mechanism without a safety net

You need to be here, Happy(8.4% to 8.9%)

Home Loan RestructureYou are here, unhappy(8.9% to 12%)

1) Cost of Restructuring in existing bank/HFC:

  • 0 to 0.35% of loan Outstanding

2) Risk Involved: If the ROI mechanism you have is flawed & does not have a safety net you will incur this cost every time there is a rate reduction. Also, on their own they will never reduce your rates & if you delay in approaching them for rate reduction there will be a further cost incurred.

3) Cost of Partial Treatment, both Tangible & Intangible Cost: After restructuring most banks will reduce your rates but it will still be 0.05% to 0.5% higher than their new customers. You are treated as a less important customer

4) Trade Off: Again, A call has to be taken on the basis of all the risks & costs involved in loan restructuring & savings in case of loan transfer

You need to be here, Happy(8.4% to 8.9%)