A personal loan balance transfer can help you save on interest costs or reduce your monthly EMIs by moving your loan to a new lender offering better terms. However, many borrowers wonder how their existing EMIs are handled during the transition. Do you need to keep paying the old lender? When do you start paying the new lender? In this article, we’ll answer these questions and explain how the process works.

Understanding the Balance Transfer Process

A personal loan balance transfer involves shifting your outstanding loan amount from your current lender to a new one. The new lender pays off your existing loan, and you start repaying them under the revised terms. While this sounds straightforward, the process involves a few steps that may impact your EMI schedule.

What Happens to Your EMIs During the Transfer Process?

Here’s a step-by-step explanation of how your EMIs are managed during the balance transfer process:

1. Continue Paying Your Existing EMIs Until Loan Closure

• Until your existing lender receives the full outstanding amount from the new lender, your loan with them remains active.
• You must continue paying your scheduled EMIs on time to avoid penalties or late payment charges.

2. Loan Closure with the Existing Lender

• Once the new lender approves your balance transfer application, they disburse the loan amount directly to your current lender to settle the outstanding balance.
• The existing lender issues a loan closure certificate, confirming that your loan has been paid off in full.

3. EMI Payments to the New Lender

• After the transfer is complete, your EMI obligations shift to the new lender.
• The first EMI with the new lender is typically due in the month following the completion of the transfer.

Key Considerations During the Transfer Process

1. Avoid Missed Payments
   • Ensure you continue paying your EMIs to the existing lender until you receive confirmation of loan closure. Missing payments can lead to penalties and a negative impact on your credit score.
2. Timing the Transfer
   • Plan the balance transfer well in advance to avoid overlap or confusion about EMI payments during the transition.
3. Check for Prepayment Charges
   • Most lenders charge a prepayment penalty for closing a loan before the end of its tenure. Factor this cost into your decision.
4. Processing Time
   • The balance transfer process typically takes 7 to 15 business days, during which you must adhere to your existing loan’s EMI schedule.
5. Communication with Lenders
   • Stay in touch with both lenders to track the transfer process and ensure all payments and formalities are handled seamlessly.

How to Avoid Confusion During the EMI Transition

1. Confirm Loan Closure

• Obtain a loan closure certificate from your existing lender before stopping EMI payments to them.

2. Set Up a New Mandate

• Once the transfer is complete, provide your bank details to the new lender to set up an EMI mandate or standing instruction for automatic payments.

3. Track Payment Dates

• Note the due date for your first EMI with the new lender to ensure timely payment and avoid penalties.

4. Use Tools Like CreditCure.ai

• Platforms like CreditCure.ai can guide you through the transfer process and provide alerts to manage your EMI schedule effectively.

Benefits of a Smooth Balance Transfer Process

By handling your EMIs correctly during the balance transfer process, you can enjoy these benefits:

• No Payment Overlaps: Avoid paying two lenders simultaneously.
• Improved Financial Discipline: Maintain a good repayment history.
• Enhanced Credit Score: Timely EMI payments, even during the transfer, ensure no negative impact on your credit profile.

How CreditCure.ai Helps You Stay on Track

CreditCure.ai simplifies the balance transfer process by offering:

• Loan Closure Assistance: Ensure your current loan is closed properly to avoid unnecessary EMI payments.
• EMI Alerts: Get reminders for both your old and new EMIs to prevent missed payments.
• Lender Comparisons: Find lenders offering smooth transfer processes and better terms.

During a personal loan balance transfer, your existing EMIs must be paid until your current loan is officially closed. After the transfer is complete, your EMI obligations shift to the new lender, often starting the following month. By staying organized and using tools like CreditCure.ai, you can ensure a seamless transition and maximize the benefits of your balance transfer.