Benefits Of A Top-up Loan

A top-up loan is the extra loan amount offered to borrowers over the existing home loan. A top-up loan is used to meet different financial needs like home furnishing, emergency expenses etc. Besides knowing what is top up loan and its eligibility criteria, borrowers must know how beneficial it can prove for applicants.

Benefits of a top-up loan

Top-up loans benefit borrowers in multiple ways:

1. Instant approval and disbursal: One of the significant features of a top-up loan is quick disbursement of funds. As the borrower is an existing customer of the lending institution, the lender is well aware of the applicant's creditworthiness. Therefore borrowers get approval for the loan amount in no time.

2. Flexible repayment tenor: Top up loan bestows borrowers with longer repayment tenor. Most financial institutions offer extended loan tenor, which helps the applicant plan out the repayment structure and help them pay EMIs on time.

3. Affordable interest rate:  Top up loan interest rate goes almost parallel with the current home loan interest rate as compared to other loan options; therefore, it is the ideal credit form that helps one in an emergency. Furthermore, if a borrower has good ties with the lender and has good repayment history, the lender may agree to waive certain charges.

4. No-end usage: A borrower can use the sanctioned amount to fund expenses. There is no restriction imposed on how one should use the amount. 

5. Tax benefits: Borrowers can only enjoy tax benefits on the top-up home loan amount if the sanctioned amount is used for home renovation and business expansion. Under section 24 (B) and section 80 (C) of the Income Tax Act, borrowers can claim a tax rebate up to Rs.2 lakh on the interest and up to Rs.1.5 lakh on the interest and principal components, respectively.

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However, borrowers must prove that the loan amount is used for the purposes mentioned above by submitting relevant documents.

To conclude, customers who already have availed a home loan from a lending institution and require more funds can opt for top-up home loans. Now, as borrowers know what is a top up loan and its benefits, they can avail of it with ease.