Before we really learn about how to transfer loan, is it not necessary to know what loan transfer is? The mechanism of transferring loan from one bank to the other is also known as refinancing. Loan transfer can be applicable for any kind of loan and is more widespread in case of home loans (it can sometimes be seen in case of credit card loan transfer or personal loan transfer as well). The second bank in questions pays off the existing loan of the current lender and the balance amount is given to the borrower on the basis of a new interest rate.
Why loan transfer?
Simple! If the new bank (the second one in question) offers an attractive interest rate (below the interest rate charged by the previous lender), the borrower can decide to avail that can go for a loan transfer.
How to transfer loan?
The procedure is quite simple. You need to speak to the new bank about refinancing. The new bank will look into your credit history and the credit score (these are basically the parameters used in assessing the loan worthiness of the applicant). If the credit score and the credit history are good, the new bank will contact the old lender and ask it to close the loan account. The balance amount will be paid off by the new bank by issuing a cheque. A new loan account is issued by the new bank and new interest rates will be applied. It must be remembered that in case you are trying to transfer a home loan and there is some accrued equity in the property, the additional funds may not be given to the applicant. This purely depends on the banks.