Take a top-up loan when a home loan is not enough to cover all expenses

Purchasing a house is a big commitment as well as an expensive affair. Individuals invest their life-long savings to build their dream homes.  

A housing loan acts as a beneficial tool by providing the required funds to fulfil the dream of owning a house. But, a home loan alone can be insufficient to meet all the financial expenses related to purchasing a home. In such cases, a top up loan can be handy.

What is a top-up loan?

This provision helps borrowers avail a certain amount of funds or top up their existing home loan amount to meet all expenses. Additionally, you can utilise the money for medical emergencies and other personal expenses, such as education, weddings and more.

What are the features of a top-up loan?

Following are the features of a top-up loan: 

  • Extended repayment tenor

This extended financial assistance comes with a repayment period of up to 20 years or till the existing home loan tenor. However, in this case, lenders determine the applicant’s profile, age, income, and property value to evaluate the tenor. Also, the tenor varies from lender to lender.

  • Substantial loan amount

The top-up home loan amount entirely depends on the financial institution. However, the home loan and the top-up loan amount must not exceed over 70% to 80% of the property’s market value. 

  • Low interest rate

The interest rate of this scheme is low, thereby reducing financial burden.

What are the benefits of a top-up loan?

A top-up loan comes with the following advantages-

  • Quick disbursal

It offers substantial funds for emergencies. Lenders disburse the amount fast to help you meet your urgent financial demands hassle-free. Besides, it does not demand a new loan application.

  • Easy-to-meet eligibility criteria

As applicants opt for this service from their existing home loan lenders, the latter only consider the borrower’s repayment history to approve the top-up application. 

  • More affordable financial tool

A majority number of lenders extend this service against 1.5% to 2% higher interest rates compared to home loans. Still, a top-up loan is an affordable option compared to a personal loan or loan against property. This way, you can significantly save against the interest obligation while borrowing additional funds.

  • Hassle-free repayment option

As the tenor of a top-up loan is equal to that of a home loan, it offers a flexible repayment plan. 

  • Tax deduction

Borrowers can avail annual tax deductions as per Section 80C and 24B. However, this relaxation is only applicable when the fund is used to purchase, construct, alter, renovate, or repair a home. 

Eligibility criteria to secure a top-up loan

Before applying for this credit instrument, applicants must be aware of its eligibility parameters-

  • One can only opt for this product from his or her existing home loan lender
  • Individuals must repay EMIs on time
  • Borrowers should maintain an impressive credit report

Besides, you need to submit a few documents along with the application form.

Documents required

  1. Identity proof (any one)
  • Passport
  • Aadhaar card
  • Voter ID card
  • PAN card
  • Valid driving license
  1. Last 3-month salary slips (for salaried employees)
  2. Address proof (any one)
  • Rental agreement
  • Passport
  • Electricity bills
  • Telephone bills etc. 
  1. Passport size photographs of the applicant

This list may vary from lender to lender.

Several renowned HFCs extend pre-approved offers on home loans to streamline the process further. To check them, provide your name and contact details.

Individuals can also secure top-up loans after availing a home loan balance transfer. Also, home loan balance transfer has a number of benefits, such as-

  • Reduced rate of interest

One of the primary reasons to opt for a home loan balance transfer is to lower interest rates. As the ROI reduces, the EMI also decreases. Thus, borrowers can save a significant amount of money.

Now, there are several options to lower the ROI. A few of them are-

  • Timely repayment record 
  • Impressive credit history

Besides, this helps to maximise other benefits from the lender.

However, the most valuable benefit of a balance transfer facility is a top-up loan. Besides home renovation or emergency requirements, individuals opting for this credit option can even utilise the fund for clearing any immediate debts.

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