According to financial experts, the growth rate of home loans in the fourth quarter of the financial year of 2018 was around 17.4%. Not only affordable interest rates but several features associated with housing loans are making these beneficial for homebuyers to avail.
One such feature is top-up loans. With the facility of top-up loans, borrowers can deal with any financial emergency during the long tenor of home loans.
What is a top-up loan?
A top-up loan is an additional loan that borrowers can avail on their existing home loans. This loan does not have any end-use restriction so borrowers can utilize the funds for any purpose as per their wishes. Borrowers can avail a top-up loan amount ranging up to Rs.50 lakh at a nominal rate of interest.
You can contact the lender your existing home loan or opt for a home loan balance transfer and avail a top-up loan from the new financial institution.
Similar Read: Benefits of Opting for Home Loan Balance Transfer
Things to keep in mind before availing a top-up loan:
There are several factors to consider before applying for a top-up loan; these are –
- Reduce your financial burden
A top-up loan can be used for debt consolidation. Since these loans do not comprise any end-use restrictions, you can use the funds to pay your existing debts. Hence, top-up loans help to lower your financial burden of dealing with debts simultaneously.
- Minimal documentation
Since top-up loans are additional loans which are availed over existing loans, financial institutions do not require extensive documentation or collateral.
As all the important documents were already provided to the financial institution earlier, borrowers can avail a top-up loan easily with minimal documentation.
- Quick disbursal time
Your existing home loan would not have been granted if you failed to meet the demands of the eligibility criteria set by your financial institution. So, while availing a top-up loan, you can not only go through the application process with minimal documentation but can also avail a fast disbursal.
- Attractive interest rate
The top-up loan interest rate is usually nominal. So, during a financial crisis, it is more beneficial to opt for a top-up loan than a personal loan, which attracts comparatively higher interest rates.
- Longer repayment period
Financial institutions generally decide on the tenor of your top-up loan as per the following –
- Outstanding amount on your existing home loan.
- Top-up loan amount applied for
However, you should keep in mind that financial institutions will never provide a repayment period of your top-up loan, which is more than the tenor of your existing home loan. You can take the help of an online top-up loan calculator to select a repayment tenor that is well suited to your financial needs.
In any scenario, if you are not offered a top-up loan from your financial institution, you can opt for a home loan balance transfer. Borrowers can not only avail a top-up loan with the help of a housing loan balance transfer but also relatively lower interest rates. It is advised to know everything about home loan balance transfer as your new financial institution may charge substantial processing fees.
By consulting with the above discussion, you will know all about home loan top-ups. For example, you can also avail income tax benefits on a top-up loan if you use it for home renovation or higher eradication.
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