Personal Loan Refinance Calculator
Refinancing Savings Analysis:
- Remaining interest under current loan: ₹45,693.
- Remaining interest under new loan: ₹33,907.
- Foreclosure charges (old bank + GST): ₹7,080.
- Processing fee (new bank + GST): ₹3,540.
- Total refinance transaction cost: ₹10,620.
- Net absolute savings after switching lenders: ₹1,165.
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Loan Balance Transfer Net Savings Formula
Calculates net benefit of refinancing a personal loan at a lower rate, factoring in closing fees and startup costs.
Worked Example: Refinancing ₹3 Lakhs loan from 14% to 10.5% (2 years left, 2% old foreclosure fee, 1% new processing fee)
Personal Loan Refinance: When is switching banks worth the cost?
Ritu was paying a 14% interest rate on a personal loan with ₹3 Lakhs outstanding and 2 years remaining. Another bank offered to refinance the loan at a 10.5% rate. Ritu wanted to check if switching banks would save her money.
She calculated her potential savings. Her current remaining interest was ₹45,900. Refinancing at 10.5% reduced the interest to ₹33,700. After adding her current bank's 2% foreclosure fee (₹6,000) and the new bank's 1% processing fee (₹3,000), her net savings were ₹3,200.
Refinancing a loan lowers your interest rate, but the savings must exceed the foreclosure fees and new loan startup costs to be beneficial.
Only refinance when the interest rate drop is significant (at least 2-3%) and you are in the early stages of a high-value, long-tenure loan.
Frequently Asked Questions
What is personal loan refinancing?
Refinancing involves transferring your existing personal loan outstanding balance to a new bank that offers a lower interest rate, reducing your monthly payouts.
What are the costs of refinancing?
You must pay a foreclosure penalty (2-4% + GST) to your current lender and a new processing fee (1-2% + GST) to the new lender.
When is refinancing a loan worth it?
Refinancing is worth it if the interest rate difference is at least 2% and you have a significant remaining tenure (usually more than 18-24 months).
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