A top-up loan is a form of credit that you can avail above and beyond your existing Home Loan. An on-going Home Loan is a prerequisite to be eligible for a top-up loan. Yet another eligibility criterion for this loan is that you ought to have an excellent credit history, preferably backed by a score of 650 or above. The terms of the loan as well as the interest rate levied differs from one bank to another. However, one aspect regarding this credit remains constant, i.e., the disbursed loan amount can be conveniently used towards any end. Right from meeting the expenses of a wedding to getting your home renovated, from paying medical bills to sponsoring your child’s education, you can use it on your accord, with no restriction, whatsoever, from the lender.
At this point, it is crucial for you to know that most lenders are rather inclined to offer top-up loans for properties that are complete, since such properties enjoy a higher valuation, and prove to be easier to sell off in case you defaulted. Hence, it may prove to be a little tricky for you to get an approval for your loan application if your property is still under construction.
If you meet the requisite criteria and have been servicing your Home Loan efficiently, it should take more than 2-3 days’ time for your Top-up Home Loan Application to get through.
Just in case you are thinking, that why not opt for a Personal Loan instead, the answer is simple. Since you are already servicing a Home Loan, the lender has all your detail in place, and you do not need to furnish any documents. Besides, the rate of interest charged for top-up loans is much lower than that charged for personal loans, thus making the former a cheaper and most cost-effective alternative.
Not convinced yet? Well, here are some of the inherent benefits of obtaining a top-up loan!
Thanks to a top-up credit, you can have the requisite funds to meet a wide array of expenses, be it debt consolidation or a much-awaited vacation, or something more significant such as expanding your business. No matter what your needs, a top-up loan can help you meet them all, without any restrictions.
You can avail numerous tax benefits on the loan amount, depending on the purpose that you use it for. If you use the amount towards the purchase or construction of a property. You can avail rebates under the section 80C and 24(b) of the income tax act. If, on the other hand, you are using it to fund your business, you can deduct the amount from your net profits, and write it off as an expense, thereby earning the much-desired exemption. Similarly, you are entitled to the associated tax benefits when you use the amount to meet other such costs. You must, however, remember that in order to enjoy these benefits, you should be able to furnish a proof that you are using the disbursed amount for the said purpose.
Owing to the fact that a top-up loan is obtained on your Home Loan,you need not offer any collateral to the lender against this credit. This is one of the only credit types, wherein you get to enjoy incredible low interest rates without providing any additional security to the lending agency.
Home Loan Interest Rates in India usually varies from 8.75% to 15%. The interest rates for top-up loans are usually 0-1.5% higher than the Home Loan rates. When compared to Personal Loan interest rates which fall in the range of 11 to 26%, top up loans come off as the most reasonable measure to meet and fulfil your financial obligations.
While top-up loans come with an impressive set of advantages, there is one limitation that plagues them, i.e., Upper Limit. The amount of the credit offered under this head is usually limited to the market value of your property. Since you have already availed the Home Loan on the same property, more often than not, you are only eligible for a comparatively smaller loan amount, often restricted to 20-30% of the value of the property. While this may be sufficient to meet your needs in some cases, if you need a higher credit amount, you may need to look for other alternatives such as a Personal Loan which allows you apply for up to 50 Lakhs of credit, depending on your income as well as your repayment history.
Now that you are well aware of the various nuances, benefits as well as limitations of top-up Home Loans, wait no more and apply for the same. After all, your financial obligations are too significant to wait any longer!
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