Top up loan is best options for borrowing funds at low cost. This Top-up loan is special option for home loan that give them freedom to borrow money. You can avail these loans when you opt for Home Loan. Top-up loan on your existing loan will save you lots of time and energy.
What are top-up loans?
Top-up loan is facility provided by banks that allows you to borrow amount above your home loan. Top-up loan is extra loan that you can take on an existing loan. If you need more funds then instead of applying for new loan you can use your original loan to get access to funds. As you are an existing customer you will get quick approval for loan.
But your eligibility depends on your capacity and CIBIL score which lender will examine. You may face financial crunch for renovation or repairing your home. So top-up loans offer you to ride any financial crunch. Thus you are free to use funds for any other needs. These loans can use for other purposes like marriage expenses, or education.
Features of Top-up home loans
Bank offers top-up loan only to existing home loan borrowers. Many banks offer Home Loan with Top-Up Loan. Top-up loans are cheaper than personal loan. Also, main features of top-up loan are low interest rate, longer tenure and no paperwork.
Top-up loan is not available to everyone who has availed home loan from bank. Several factors taken before granting top-up loan. Bank checks repayment ability and past track records of previous home loan. If you have good credit report then bank grant top-up loan by charging some processing fee. In some cases banks waive processing fee and you need to maintain record for at least 1 year.
No Restriction on Spending
There is no restriction to spend money raised through top-up loan. This money used for renovation, personal needs, medical expenses or any other expenses. Bank approves top-up home loan depends on market value and outstanding home loan amount.
Tenure for top-up loans is 10 years which can go up to 20 years depend on your existing home loan term. This means borrower have to pay back top-up loan amount with 20 years from date of disbursal. Bank offers top-up loans that have good credit history only.
Also, loan tenure also depends on your profile and existing EMI. Longer tenure will help in getting high loan amount compare to personal loan and Gold loan. But your top-up loan amount and outstanding loan amount must not exceed LTV ratio set by bank.
Low Interest rate
Top-up interest rate is like home loan rates. You can avail low interest rate on Top up Loan than other loans. Top-up interest rates are up to 50 to 100 bps higher than home loan rates. Some lenders also charge at same rate for home loans. This gives cheapest credit facility to existing home loan borrowers.
Apart from this, top-up loan can use for existing debt of other loans taken at high interest rates. Top-up home loans differs from bank to bank.
What is Tax Benefits?
Tax benefit of top-up loans will depend on usage. You avail same benefit as home loan if amount is utilize for renovation or home construction. But if it is used for any other purpose then you are not eligible for any tax benefit.
Thus, interest paid on top up loans qualifies for tax deduction under section 24b. If loan used for new property then principal amount and interest qualify for tax benefits u/s 80 C 24b. Hence, top-up loan used for education is not qualified for tax benefits u/s 80E.
All banks will charge processing fees for approving top-up loan. These charges are same as their home loan processing charges. You must not avail this facility unless it is necessary. But in cases of emergency top up loan is better alternative compared to personal loan.
Top up Loan is good alternative of Personal loan
You must understand that top-up loan is better than personal loan. There are high chances of getting top up loan if you have home loan with good track record of payment. Also, if you have already paid 3-4 years of your home loan you will get decent amount of top up loan.
Home Loan Top Up loan is hassle-free and requires very little paperwork. You can repay loan through easy EMIs and there are no repayment charges. Selecting right kind of loan for right purpose is very important.