Have Two Home Loans? Here’s How To Consolidate Them Into One And Save Money
When interest rates on loans are high and you do not have any extra income to pay the higher interest, managing multiple home loans at once can be challenging. In the case of more than one home loan, there may be many other challenges, but if you are able to club them together, then you can get some relief. Now the question is what are the options for combining two loans? If you want to combine two separate home loans into one loan, you can do so with the help of debt consolidation approach. Let us understand the different ways to consolidate two home loans and save money.
Convert two home loans into one with debt consolidation option
Managing two home loans at the same time requires a lot of financial discipline and alertness. Along with this, there is a need to keep a close eye on the changes in interest rates. It is also worth noting that each loan may have different interest rates depending on the loan size, repayment tenure and credit score. In case of long tenure home loans, even a small increase in the interest rate can have a huge impact on your remaining repayment tenure. Taking two big loans at the same time can affect the issuance of new loans. If both the home loans are from the same bank or financial institution, then any default in the repayment of one of the two home loans can affect the other home loan as well. In such a situation, with the help of debt consolidation option, both the home loan accounts can be combined into one.
Find a suitable lender who gives cheap loan
You can consolidate two home loans into a single one using the home loan balance transfer option. However, one has to first find a suitable lending bank or financial institution that allows combining two home loans at a lower interest rate using balance transfer and charging zero or very low charges for the same. To repay the combined loan amount, the lender will assess your creditworthiness and loan eligibility. Additionally, you will also have to take consent from the existing lender to transfer your loan.
The new lender will pay the outstanding amount to the existing lender to close both the home loans. After that your home loan will be consolidated into a single loan. After going through this process, there will be a single home loan with the new lender. Once the home loan is consolidated, you now have a single loan to repay.
You can try top-up loan service
There may be other ways to club the home loan. You can avail a top-up loan facility on one of your existing home loans to close another home loan. This will make one of your properties debt-free. However, this is possible only if you have sufficient top-up loan amount eligible for one of your existing home loans. By consolidating the loan through such a service, you can save a lot of interest in the long run as well as the repayment tenure.
Keep these things in mind also
You should check with the financial institution offering the loan whether it is ready to offer the loan consolidate option. Get your eligibility checked for a new loan. Maintain a higher credit score before loan consolidation to ensure the best interest rate. While closing the existing home loan, properly understand the charges and other charges imposed by the lender.
Adhil Shetty, CEO, Bankbazaar.com, said, "The primary reason behind consolidating loans is to secure a more favourable overall interest rate, paving the way for substantial long-term savings. Consolidating two home loans into a single one presents numerous advantages, making it an optimal choice for those managing multiple housing loans. Firstly, merging the loans streamlines the repayment process, requiring you to make a single EMI payment to one bank. This consolidation may also result in a more cost-effective interest rate, contributing to potential savings. To merge two home loans seamlessly, opting for the balance transfer option is a recommended strategy. Virtually every bank now offers this facility, requiring the assessment of your creditworthiness and loan eligibility. The process involves obtaining consent for the loan transfer from your existing bank. The new bank then disburses the outstanding amount to your old bank, effectively closing the initial loan. This approach not only simplifies loan management but also enhances the overall ease of handling your financial obligations."
"An alternative avenue for repaying the second home loan involves leveraging the loan top-up facility on an existing loan. By availing of this option, you can settle the second home loan, rendering one of your properties debt-free. However, it's imperative to ensure that the top-up loan amount is sufficient to cover the outstanding balance. This strategic move not only leads to potential interest savings but may also result in a shorter repayment tenure. The consolidation process entails actively seeking a lender who provides a balance transfer facility at a reduced interest rate, ideally coupled with minimal or no processing fees. Once an appropriate lender is identified, the remaining balances from the existing home loans are seamlessly transferred to this new financial institution. Following this transfer, the borrower initiates payments towards the consolidated loan to the new lending entity. It is important to note that even a marginal reduction in the interest rate can translate into a significant decrease in the total amount paid over the entire duration of the loan. Remember, combining home loans can be a complex process, so it's essential to weigh the pros and cons carefully before making a decision," Shetty added
The terms and conditions associated with the consolidation option, which converts two home loans into a single loan, and balance transfer may vary from bank to bank. In such a situation, the person borrowing should take advice from his financial expert before proceeding with the information given above.
