Top Things to Know About the Top-Up Loan

Emergencies come unannounced. Faced with occurrences that need your immediate financial attention, you will have to look for funding options to meet them. When servicing a hefty home loan, taking a separate loan may not be a viable option. This is when a top-up loan comes to your rescue.

What is a home loan top-up?

The top-up home loan is an amount your lender offers you over and above your existing home loan. Just like a mobile phone top-up plan, this loan gives you add-on access to funds as an attachment to your existing loan. Owing to the nature of this loan, you do not have to separately apply for it as an independent loan, but get it as a supplement. One trademark of the home loan top-up is its versatility. There is no restriction on how you can use it. This means you can use it for umpteen personal or professional purposes without a hassle.

How do you become eligible for the top-up loan?

To apply for a top-up loan, you should meet the pre-condition of the loan, which is you should have an existing home loan to your name. However, if you currently have a home loan, then a top-up loan is not automatically given to you as a consequence. You will be eligible for a top-up loan, only if you fulfill a minimum repayment period with your lender. This parameter varies across financial institutions. Apart from a good repayment record, you must have a credit score of at least 700 to claim a top-up loan sanction.

What are the advantages of a top-up loan?

The top-up loan is certainly a loan of convenience and it brings to the front several positive factors. Firstly, you do not have to bear the hassle of lengthy paperwork submissions that you may otherwise have to follow when applying for a fresh loan. Then, after submission of your application, you do not have to wait for days to get a sanction. As the lender sanctions your loan based on your past records and existing home loan, the approval process is quicker and more convenient. In addition, you get the sanction on lower interest rates.

Further, you can get a sanction amounting to up to 70% to 80% of your property price as a top-up loan. The amount varies across lenders and how much you have currently paid on your home loan. As compared to other unsecured loans, you can repay the top-up loan via a longer tenor matching up to your home loan tenor. Lastly, you can claim tax benefits and exemptions on the top-up loan provided you use it for home renovation and construction purposes or use it to fund the cost of education for your kids.