Implications of common terms used in balance transfer
Balance Transfer of a Personal Loan involves the taking over the outstanding loan amount of an existing loan. An external financer can offer to transfer the principle loan amount balance: if the terms of the personal Loan running adhere to its policy.
Principal amount of a Personal loan:
The Principal loan amount refers to the Original Loan amount which has been borrowed from the Bank. The principal loan amount reduces with the payment of the monthly EMI.
The balance outstanding of the principal loan amount will be taken over when affecting the Balance Transfer of a Personal Loan.
Re payment Schedule of a Personal Loan:
The re payment or amortization schedule is a chart or table depicting the pattern of repayment of a personal loan to the Bank or financer. It also shows the breakup of the EMI as per the following;
The Loan Track:
The applicant can request for the Loan Track of the existing personal loan from the concerned Bank. The track of a Personal loan gives details of the status of the Personal Loan:
Equated Monthly Installement (EMI):
The monthly installement or EMI as is commonly known, is the instrument for paying back the Personal Loan .To recover the loan amount, a Bank or financial institution will deduct from the Bank account of the applicant equated monthly instalments (EMI) comprising of the interest & principal every month as per the tenure. The EMI for a personal loan is calculated @ monthly reducing balance & remains constant for the entire tenure.
Electronic Clearing System (ECS):
The ECS is offered by the Reserve Bank of India as a system for faster collection collections & payments. To recover the monthly EMI due through the ECS mandate, an authorisation form is signed by the applicant as part of the Personal Loan agreement. Henceforth the EMI is debited at a fixed date month on month for the Tenure of the Personal Loan.
The tenure is the duration for the pay back of the Personal Loan. The tenure for a Personal Loan ranges from 12 months up to 60 months: It is finalised at the time of the Loan disbursal & cannot be altered. The EMI is deducted from the Bank account of the applicant for the duration of the tenure.
It is fixed by the Bank as per the customer requirement & the payback capacity.
Top Up Amount:
Requirement for any additional amount can be applied for with the request for Balance Transfer, this amount is known as a Top Up.
Thus the loan amount applied will include the principal balance of the previous loan amount & the additional amount required. The Rate of interest & other terms & conditions applicable for a Balance Transfer will be valid for the total loan amount.
If a personal loan holder wants to return the loan amount borrowed from a Bank or a financial institution before the completion of the loan tenure it is called a pre closure.
The pre closure of a Personal loan is governed by the Pre closure terms of the Personal loan agreement, signed between the applicant & the lending institution .The policy for pre closure varies as per the rules & regulations of different Banks. The condition being of a minimum number of EMI, S to be paid before the applicant can pay back the Loan amount. The applicant should make note of the Pre Closure & other terms & conditions of the Bank when signing the Personal Loan agreement.