A top-up loan is the best solution for getting a long-term loan without mortgaging any other asset while you already have an ongoing home loan.
Some banks might restrict how you use the top-up loan amount, but most banks offer such a loan as a personal loan with added benefits, meaning there are no restrictions on how you would spend the top-up loan.
What Is A Top-up Loan?
A top-up loan is essentially additional financial assistance offered by lending institutions to cover all the other associated charges that come with buying a home, like registration fees or interior decoration.
However, you can use a top-up loan in case of a financial emergency or any other situation, such as purchasing a new asset. Lenders issue a top-up loan to individuals who already have an existing loan and have been consistent with the loan repayments.
Benefits Of Availing Of A Home Loan Top-up
Home loan top up is one of the best ways to cover any additional financial needs while you pay off your existing home loan.
Here are some important benefits of getting a top-up loan with your existing home loan for you to consider:
Simple Eligibility Criteria
Since your lender already has your eligibility documentation, you do not have to resubmit all the documents; you only need to resubmit the essential documents, like residence and income proof.
A top-up loan can be availed by anyone in the age group of 18 to 70 years. The lender will determine the maximum limit of the top-up amount based on your existing loan value and the market value of the mortgaged property.
Tax Benefits
Just like you can get benefits on home loan interest repayment, you can claim a tax deduction if you use the loan towards renovating or decorating your home for which you have a home loan.
For example, if you pay an interest of Rs. 32,000 on the top-up home loan, you can get a maximum tax deduction of Rs. 30,000.
Multipurpose Loan
A top-up loan is multipurpose. That means you can use it for things like renovating your new home, making repairs, or you can even invest it for your child’s future.
No Usage Limit
Like a personal loan, you can use the top-up loan in any form or cover any of your extra expenses. A loan top-up tenure is generally the same as your remaining loan tenure, which means you can comfortably pay off any additional amount you avail.
No Need For Security
Since a top-up loan is connected to your current loan, there is no need for additional mortgage or security when availing of this loan. This makes the process simpler for you.
Features of Home Loan Top-up
If you’re considering a top-up loan, the following are some of the features of a top-up.
- With a top-up, you can repay the loan in the same tenure as your existing loan. So if the pending tenure of your loan is 20 years, your top-up is valid for the same duration.
- A top-up loan has a lower interest rate than a personal loan, so if you have a financial emergency, you can avail of a top-up with a much lower interest. A home loan interest calculator is a great way to determine the interest you need to pay on your loan.
- You can get the loan with quick processing since the financing institution already has your verified documents and KYC.
- You can get your requested top-up loan if you have a good credit history and have repaid all existing loan installments on time.
To Conclude
Nowadays, top-ups are seen as a sure way to get cash out of their existing home loan. loan top-ups can be a great way to acquire extra cash and take advantage of the equity in your property. It certainly can make things much easier, and helps to spread out the repayment so that the strain isn’t as bad. But there are many different types of top-up loans available, with various features and benefits. If you’re looking to apply for a loan of this type, then it’s important that you understand how it works.
A top-up loan is an alternative that can help you realize your financial requirements without you having to go through the process of getting a home loan. However, keep in mind that a top-up loan is provided only to borrowers who have already repaid the minimum number of required home loan EMIs.
