While real estate’s price is rising with each passing day in India, the demand for home loans is also escalating at a higher rate. However, the significant expenses involved with purchasing a property can put one under extreme financial pressure.
In such a situation, taking a simple home loan is not sufficient to curtail financial duress. Thus, borrowers may need to avail additional assistance in the form of a top-up loan. Therefore, individuals need to know everything about this loan to make fair use of the fund.
What is a top-up loan on a home loan?
A top-up loan means an additional financial assistance one can avail of on their existing home loan over and above the housing loan proceeds. An existing home loan borrower is eligible for top-up loans when they opt for a home loan balance transfer. It means that borrowers can settle for a better home loan interest and with additional tax benefits.
Also, the eligibility of top-up loans depends on a good repayment history of the borrowers. Hence, individuals who are already servicing a home loan can avail of an additional loan on top of that.
Moreover, a top-up loan on a home loan contains several specifications and borrowers need to know how they can be benefitted from a top-up loan before making an informed decision.
Features and benefits of a top-up loan
Multipurpose use- One of the advantages of availing of a top-up loan is its restriction-free application. Borrowers can utilise the money in any way they please without any interference from the lending institutions. It may include-
- Renovation of home.
- A trip abroad.
- Addressing medical emergencies.
- Finance, higher education, and more.
Therefore, unlike a home loan, which must be used solely to purchase a property, land or plot, a top-up loan does not come with such compulsions.
High loan amount- The top-up loan depends primarily on the outstanding home loan amount and should not exceed 70% of the property’s value. Moreover, some reputed housing finance companies offer a top-up loan amount of up to Rs.50 lakh with a favourable balance transfer facility.
Lower interest rate- With balance transfer facility, borrowers can avail of a top-up loan with a lower interest rate than its existing rates and better terms of service. Individuals can stay confident about the fact that the interest rate on top-up loans would be less than that of other commercial loans. Hence, borrowers can find out the factors related to top-up loans that can positively impact on your home loan interest rate.
Tax benefit- Another significant top-up loan benefit is that the borrowers are entitled to claim a tax deduction. Under 24B of income tax section, borrowers can avail a tax deduction on home loan interest rate of up to Rs.2 lakh interest payable.
Hassle-free documentation- Since the top-up loan comes with existing home loan, borrowers can avail of the fund without further documentation. Therefore, when you apply for such a credit, you do not have to go through lengthy documentation. The lending institution will already have access to necessary documents beforehand. This increases a quick disbursal of the loan amount.
To ensure even faster disbursal, some reputed housing finance companies provide pre-approved offers to simplify and expedite the loan procedure. These offers are available on several financial products such as home loans, loan against property and more. Individuals can check their pre-approved offer by providing their name and contact information.
Thus, the benefits of a top-up loan are ample. Before applying, make sure you use a top-up loan calculator to assess monthly liabilities from the same.
