Loan refinancing or balance transfer involves transferring your existing loan from one lender to another, typically to get a lower interest rate or better terms. This can help you save money on interest payments and reduce your EMI burden. However, it's important to consider processing fees, break-even period, and other charges before making a decision. Many borrowers refinance their home loans or personal loans to take advantage of lower interest rates offered by new lenders.
When you refinance a loan, the new lender pays off your existing loan, and you start fresh with new terms. The key factors to consider are the interest rate difference, processing fees, prepayment charges (if any), and the break-even period. Use this calculator to compare your current loan with the new offer and make an informed decision. For detailed EMI calculations or understanding your loan eligibility, check out our other loan calculators.
The break-even point is crucial - it tells you how long it will take to recover the processing fee through interest savings. If the break-even period is shorter than your remaining loan tenure, refinancing usually makes financial sense. Always negotiate processing fees and check for any prepayment charges from your current lender before transferring. If you're also considering prepaying your loan, compare both options to see which saves you more money.
Loan refinancing is particularly common for home loans where even a 0.5% interest rate reduction can result in substantial savings over the loan tenure. However, it's important to factor in all costs including processing fees, valuation charges, legal fees, and any prepayment penalties from your current lender. Use our calculator to get a clear picture of whether refinancing makes financial sense for your situation. For more information on loan products and refinancing guidelines, consult the Reserve Bank of India website.
Input your outstanding principal amount, current interest rate, and remaining tenure in years. These details can be found in your loan statement or by contacting your current lender.
Add the new interest rate offered by the prospective lender, the new tenure you want, and the processing fee or transfer charges involved.
Click "Calculate Refinancing Benefits" to instantly see a comparison between your current loan and the new offer, including savings analysis.
Check the recommendation banner to see if refinancing is beneficial for your situation. Review the net savings after processing fees.
Understand the break-even point - how long it will take to recover processing fees through interest savings. If break-even is within your loan tenure, refinancing makes sense.
Review the side-by-side comparison cards to see current EMI, new EMI, total interest, and total amount payable for both options.
You should consider refinancing when the new lender offers a significantly lower interest rate (typically 0.5% or more), the break-even period is shorter than your remaining loan tenure, and the net savings after all charges are positive. Also consider refinancing if your current lender's service quality is poor or you want to adjust your loan tenure.
Break-even point is the number of months it takes to recover the processing fees and other transfer costs through the monthly EMI savings from refinancing. For example, if processing fee is ₹50,000 and you save ₹2,500 per month on EMI, break-even is 20 months. If your remaining loan tenure is longer than 20 months, refinancing makes sense.
Include all these costs in your calculation: