Loan portability: What is the role played by a personal loan EMI calculator? | Mint

Do you have an offer to port your current personal loan from one bank to another? If yes, it is vital that you do your calculation incisively and take a well-deliberated decision after factoring in all the costs such as the processing fee and total savings which accrue on account of porting.

Let us suppose you have raised ₹5 lakh loan (for a duration of 36 months) at 11 percent interest per annum. Then you receive another offer for 10.5 percent per annum while you have already repaid the principal amount of ₹50,000 (in 4 months).

However, this would trigger a processing fee of ₹3,500. In the second scenario, you have a similar offer of 10.5 percent, but the processing fee is lower this time i.e., only ₹1,500. 

How will you compare the offers as described above?

Notably, a better offer with a lower interest rate is usually made by the bank when your credit score is impressive. For instance, borrowers with a high credit score are typically offered loans at a lower rate of interest. Conversely, borrowers who have a low credit score are offered loans at a higher interest rate.

You can use a personal loan EMI calculator to carry out this calculation.

So, if the new has a processing fee of ₹5,000, it does not make sense to port the loan because it turns out to be more expensive (5000 > 3,377).

In scenario II, when the total savings of ₹3,377 are more than the additional cost of ₹1,500, it would make sense to port the loan from your current bank to the second bank.

(Note: Remember that personal loan has its own set of risks)