Education loan refinancing is one of the most preferred options today for students who have taken an education loan with a floating interest rate. When the inflation rate becomes high the borrowings also gets affected and the rate of interest increase. This makes your education loan costlier. When you choose education loan refinancing you generally get lower interest rates, a flexible repayment structure, and a longer repayment period. There are a lot of public and private sector banks and financial institutions that offer education loan refinancing for students. Let’s discuss how to transfer an education loan to another bank.
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Benefits of Transferring Education Loan to Other Bank
There are a lot of benefits to transferring an education loan to another bank. You will get low interest rates, a revised and flexible EMI structure, a longer repayment period, better customer service etc. Loan refinancing is a potential saving for you as it reduces the overall cost of the education loan. In some cases, you can even get an extended period for further studies if you want to pursue the same. For example, under the SBI takeover of education loan, you can easily get a top-up loan after refinancing to pursue further with an extended repayment period.
- Through education loan refinancing you can get your monthly EMIs reduced to a lower amount
- It will have a good impact on your credit score and it will increase when you pay your EMIs on time
- The education loan refinancing will also cover the payment of any other outstanding or penalty due with the existing lender.
Also Read: Benefits of Education Loan Refinancing
How to Transfer an Education Loan?
Transfer of education loans depends upon several factors. You need to have a good credit score (above 700) and the repayment of the existing loan must have been started. When you decide to transfer your education loan to another bank you need to figure out the best-suited options like which bank should you choose, what shall be the interest rate, how much is the overall cost of the loan and the difference between the cost of exiting and new etc. Check the step-by-step guide involved in transferring education loans to other banks.
Research and Choose the New Bank
While finalising your decision to get an education loan refinance always do proper research comparing the terms and conditions of different banks. Nowadays there are a lot of NBFCs that offer education loan refinance at affordable rates. You can compare banks and NBFCs for loan transfers. Check customer reviews and feedback and the track record of the bank/lender which you want to choose as your new banker. Consider factors like interest rates, loan tenure, repayment options etc and ensure that the new bank is willing to approve the education loan transfer.
Review Existing Loan Terms
Before finalising your education loan transfer, thoroughly review the terms and conditions of your existing education loan. Take note of the interest rate, outstanding balance, and any prepayment charges. This information will be essential during the transfer process. Also, you will be able to figure out the difference between the repayment amount of an existing loan and a takeover loan.
Apply to the New Bank
Now that you have finalized the bank for your education loan refinancing you can move ahead with the application process. Contact the chosen bank to initiate the transfer process. They will provide you with a list of required documents, which generally include your existing loan agreement, repayment history, and proof of identity, among others. Fill out the loan transfer application form and provide the necessary documents.
Also Read: Best Time to Apply for Education Loan Refinance
New Bank’s Evaluation
The new bank will evaluate your application and financial stability. They will check your credit history and assess your ability to repay the loan. If you meet their criteria, the bank will provide you with a sanction letter detailing the terms of the new loan. Through this, you will get to know the exact repayment costs, details of the EMI and interest rate charged. At this step, you can also negotiate with the bank over the interest rate.
Inform the Existing Bank
Once the new bank approves your loan transfer, you must inform your existing bank about your decision. You will need a no-objection certificate (NOC) from your current bank, which states that they have no objections to transferring the loan to another bank. The new bank will check the details like your EMI repayment history with the existing bank. Also, if you have any penalties or overdue amounts charged by the existing lender you must inform the new bank and check whether they are ready to cover that or not.
Loan Transfer
After completing the necessary paperwork, your new bank will pay off the outstanding balance of your existing loan to the old bank. This effectively closes your loan account with the old bank and opens a new one with the new bank. After this process, you will get all the details about EMI deductions and the ECS presenting date.
Repayment with the New Bank
Once the loan transfer is complete, you will start repaying your education loan to the new bank as per the terms and conditions agreed upon in the sanction letter. It’s essential to ensure that you follow the repayment schedule diligently. Now that your interest rate is lower your EMI amount will be less than earlier. Hence, try to make all the EMI payments on time to increase your credit score. A high credit score helps you to get loans faster with better interest rates and repayment periods.
FAQs
Yes. If you have started your repayment for your existing loan and have paid for one year you can easily get an education loan refinancing.
Usually, most banks don’t approve a loan transfer if it has already been refinanced by some other bank. You need to make a fresh application for an education loan refinance and make sure that it hasn’t been transferred earlier.
To get an education loan refinance you need to be above 18 years of age and your credit score must be at least above 650-700 subject to the terms and conditions of the lender.
Education loan transfer is one of the best options through which you can manage your finances efficiently. When you transfer an education loan you get low interest rates and flexible repayment terms. This reduces your monthly EMIs and makes your loan cheaper.
To know more about education loan transfer, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
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