In the last few years, there has been a marked increase in the popularity of housing loans among borrowers. Sometimes, the amount of loan availed does not prove to be sufficient enough to meet one’s housing-oriented financial requirements. In such cases, instead of availing a new credit, home loan borrowers may avail a top-up loan.
What is a top-up loan?
A top-up loan is basically a financial extension on your existing home loans that lenders offer beyond the simple home loan proceeds. Those who already have a home loan and clear their EMIs on time can easily apply for a top-up loan. Moreover, availing of this loan does not require one to submit any new documents.
Now, borrowers should know everything about top-up loan along with the benefits that are highlighted below:
Benefits of a top-up loan
- High loan value and low-interest rate- Borrowers often avail a high loan amount through this credit option and fund their financial requirements. Regardless, it must be noted that the loan value depends on the market value of the mortgaged property and the amount of money availed as a home loan. The interest rate on top-up on home loans is a bit higher than the home loan interest rate.
Notably, some top HFCs levy a nominal interest rate on top-up loan borrowers at the time of balance transfer. Hence, Individuals can choose a home loan balance transfer to reduce their EMIs and make the repayment process convenient.
- Multi-purpose option- This financing facility does not come with any end-use restriction and is a better alternative to home improvement loan because of its versatile aspect. For instance, housing loan borrowers limit the use of loan amounts to meet the renovation cost.
On the other hand, top-up loan borrowers have the liberty to use the sanctioned loan value to fund any personal or house-oriented requirements.
- Longer tenor- Usually, a top-up loan facility comes with a tenor ranging from 10-20 years. Such an extended tenor facilitates the repayment process and allows housing loan borrowers to conveniently repay the loan amount. Additionally, the borrower’s profile and repayment history also play a significant role in securing longer tenors.
- No collateral- No additional collateral is required to avail of a top-up loan. Since the loan is offered based on an existing home loan, financial lenders already have the necessary documents. Therefore, no collateral is required.
- Quick disbursement- Since the additional funding is extended to existing customers, financial institutions already possess the applicants’ verified documents.
- Tax benefit- Individuals who have availed top-up loan to meet the expenses of house renovation or repair are entitled to claim tax benefits. In such a case, borrowers can claim a tax deduction on interest payout under Section 24(B). Notably, individuals must submit necessary documents that will prove that the borrowed housing loan amount was used for home construction.
Hence, a thorough financial plan and repayment strategy always comes in handy in managing home loans successfully. Nonetheless, by using a home loan calculator, one can make informed decisions about the same.
Thus, borrowers planning to avail of a top-up loan can do so through reputed housing finance companies that offer an additional loan amount of up to Rs.25 lakh at an attractive interest rate. Additionally, the company also provides pre-approved offers to simplify the lending process and save time.
The pre-approved offers are available on several financial options such as home loan, loan against property and more. Hence, borrowers can check their pre-approved offer by entering their name and contact information.
