A top-up loan is an additional advance that borrowers can avail over and above their existing home loan. These loans eliminate the need to avail of new credit when individuals require external financing. In turn, the entire process of securing additional financial aid becomes much simpler and less cumbersome.
Several features and benefits of top-up credit make it a viable option for most housing loan borrowers.
Reasons to avail a top-up loan
These following make it a feasible financial aid to meet all housing-oriented needs and requirements effectively.
Simple eligibility criteria
Existing borrowers who have availed a home loan balance transfer can avail a top-up loan credit easily. Other than this, customers with a sound credit report and good CIBIL score would be considered as more eligible by HFCs.
Quick processing and disbursal
The fact borrowers avail this additional credit facility from their home loan lenders makes the verification and disbursal short and simple. To elaborate, HFCs already possess all the required documents and have already verified them before disbursing the existing home loan. As a result, borrowers can avail the required financial assistance quickly and without a lot of hassles.
Zero restrictions to use
Unlike a home loan, top-up credit does not come with an end-use restriction and is versatile in utility. Resultantly, individuals can fulfil any financial needs with a top-up loan which is beyond housing requirements.
For instance, they can use the money availed to furnish their home, purchase interior décor items, pay for their child’s higher education, address a medical emergency, etc.
No additional security required
Since it is extended on an existing home loan, borrowers do not need to mortgage any additional asset. It directly makes it a more feasible loan option for many individuals.
Affordable rate of interest
When compared to unsecured loans, the rate of interest levied on a top-up loan is relatively lower. This, in turn, makes the credit facility much feasible and cost-effective.
Income tax benefits
This additional credit facility also extends income tax benefits to borrowers. However, such a benefit can be claimed if the money availed is used for home construction, renovation, extension, etc.
To make the most of this credit option, make sure to find out all about top-up loans on home loans. It will help you to streamline the entire process smartly.
Things to consider
Before home loan borrowers decide to avail of a top-up loan, they should consider these pointers carefully.
Borrowers can avail this facility only after they have started paying off their existing loan. Typically, some HFCs follow a 2-3 year repayment period before they consider borrowers’ plea to avail of a top-up loan.
The tenor of top-up loans depends on the borrower’s age, income, and property value. Generally, it comes with a tenor of 20 years or the remainder of the loan repayment period.
It must be noted that financial institutions usually offer top-up advances when borrowers opt for a housing loan transfer. A loan balance transfer is generally availed to lower interest rates. However, there may be associated charges for this facility, which home loan customers should check beforehand.
In a nutshell, simple eligibility criteria, zero restrictions on end-use, minimum documentation, and a low rate of interest are among the many reasons to avail of a top-up loan. Regardless, borrowers must become familiar with the associated terms and conditions to utilize their loans smartly.
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