Balance Transfer Savings Calculator

About the Balance Transfer Savings Calculator

A balance transfer, also called a refinance, moves your outstanding loan from your current lender to a new one offering a lower interest rate. Because interest is charged on the remaining principal, even a rate cut of one or two percentage points can save a large sum over the rest of a long loan such as a home loan. This calculator compares your existing EMI and interest with the new terms so you can see the real saving.

The new EMI is computed on your outstanding balance using the standard reducing-balance formula, EMI = P x r x (1 + r)^n / ((1 + r)^n - 1). The saving comes from the difference in total interest over the remaining tenure. However, a transfer is not free: the new lender may charge a processing fee, and there can be legal, valuation or stamp duty costs. The right decision is the one where interest savings comfortably exceed these one-time charges.

Balance transfers make the most sense early in a loan, when a large principal and many remaining instalments mean interest still dominates each EMI. Late in the tenure, when little principal is left, the savings rarely justify the switch. Some borrowers also use a transfer to access a top-up loan at a low rate. Always compare the total cost, not just the headline rate, before moving your loan.

How to use it

• Compare total interest saved against processing, legal and valuation charges before switching.
• Balance transfers save the most early in the tenure, when the outstanding principal is high.
• Ask the new lender about a top-up loan, which can be cheaper than a fresh personal loan.
• Check for foreclosure charges from your current lender, though floating-rate home loans usually have none.