Pros and Cons of loan take over

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Pros and Cons of loan take over

We as borrowers might get very excited and happy about lower interest rates and would want to transfer our existing loan to a new bank , but there are many factors we must keep in mind while going in for loan take over.

  1. Calculate the total amount  you would be paying after you get a take over of loans. Do your maths properly before going in for take over. It’s always the interest part that we pay to the banks first so always do your calculations wisely otherwise you would not be in winning position, rather it would be a silly decision.
  2. Check how much loan amount you would be transferring vis a vis your collateral’s valuation. If your loan amount is small then keep aside the security double the amount for some other bigger loan you would want in future and provide another collateral.
  3. Just check the other charges like processing fees or allied charges or another new bank account you are asked to open and compare these with the lower interest rates you would be getting.


Whole idea should be to get your calculations right before taking any decision on take over of your loans. Decide wisely.

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TakeOver of loan. Why is it viable

After the PM Narendra Modi announced subsidy in pradhan mantri awas yojna (PMAY) , the interest on home loans have considerably gone down resulting in lower EMIs. This could be the best time for take over of your present home loans if you are not happy with your present bank.

In a layman’s language, take over of loan would simply be transferring your remaining loan amount from your present bank to another bank due to various merits it may accrue to you.If we talk of benefits of loan take-over, there certainly are many like :
1. Due to lower interest rates by other banks or
2. Poor lending services by present bank or
3. Your need for additional loan amount etc.

Question may arise which all loans can be taken over by the banks. Following are the loans that can be taken over by another bank.

1. Home Loans/LAP (for business and salaried class both)
2. CC/OD limit ( for business class )
3. Car Loans (for business and salaried class both)
4. Personal loans (for salaried class only)

Are you eligible for the take over of your loan? It depends on many factors like.

1. Client should be having valid documents about title of the property in case of home loan/ LAP take over for higher amount to be taken.
2. Client should be eligible as per the bank norms for additional loan amount.
3. Client should have paid off his instalments with earlier bank regularly.

So the take over of loans would be good idea in case you are eligible and your present bank is not meeting your requirements and expectations.

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Takeover of Home Loans

Home Loan may be taken over from the following Institutions?

  • Scheduled Commercial Banks (SCBs);
  • Private and Foreign Banks;
  • Housing Finance Companies (HFCs) registered with National Housing Bank (NHB);
  • Borrowers employers if they may be Central/State Govts. Or their undertakings or Public Sector Undertakings, yes. Issue to the following:-
  • Borrower should fulfil the eligibility standards for availing Home Loan as in line with the Banks instructions.
  • The borrower needs to have serviced interest and/or instalment of the existing loan regularly, as in step with the authentic terms of sanction.
  • The borrower has valid documents evidencing the title to the house/flat.

Take over with sanction of Higher Loan Amount is possible?

Bank may sanction an amount higher than the amount taken over from different bank/ monetary group for purposes of protection/ extension/ furnishings. Similarly extended repayment period may be sanctioned supplied that always the standards regarding maximum permissible finance and security margin under the Bank’s schemes aren’t diluted.

What is the process for Take Over?

  • The borrower ought to deal with a letter to the bank/ economic group from whom he has availed the loan asking them to supply, at once upon receipt of the loan quantity, the name deeds and other securities, if any, direct to our lending branch;
  • The borrower must give to the branch a request letter for paying to his existing lending financial institution / monetary group the excellent quantity of his mortgage by debit to his mortgage account.

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Loan Takeover

Banks and finance businesses are looking to gain enterprise by offering lower interest rates. But you, as a borrower, want to study other components as properly, before shifting your loan from one bank to another.

Technically called “takeover of mortgage”, shifting a mortgage means approaching a bank and asking it to problem a loan amount that is outstanding amount with the current bank, repaying to the current bank and persevering with the loan with the new bank. You will enjoy the lower interest rates or decrease EMIs. It gains new business. But, is the interest rate or a lesser EMI the best consideration? Here are few important factors that help you take the final choices:

Calculate the full outflow?

Although the new bank attempts to attract you by using decreasing your month-to-month EMI and providing you with a longer span to repay (increasing your tenure), you have to be clean that such facilities increase the total amount you pay to the bank due to the fact the interest keeps on including to the outstanding loan amount. If you’re paying better EMIs with your present day bank, compare the total outgo for each bank and then take a choice. If you aren’t difficult-pressed for coins, you need to prefer staying with your bank, pay a bigger EMI and finish off your mortgage as quickly as feasible to shop all the cash you will overpay, by means of opting for an extended tenure.

Study the processing fees and different allied prices

Take into attention the processing charge, stamp duty, legal charges, valuation rate, technical expenses that your new bank would fee and examine it with the benefit in terms of reduce interest rates.

For some banks, processing fee is a percentage of the overall loan amount, while for others, it relies upon whether you are salaried or run a business. If the bank calculates it on the basis of the outstanding amount, calculate it in rupee terms to find the cost. Also, your present bank may jack up the charges of closure of account if it reveals out that yours is a case of takeover.