A top-up loan refers to additional funds given over and in addition to an existing loan, like home loans, on opting for facilities like balance transfer. Housing loans usually have long repayment tenors and occupy a large part of a borrower’s liabilities, making it difficult for them to acquire additional finances. Selected lenders offer a solution through a home top-up loan to loyal borrowers if they make regular and timely repayments.
The following sections will explain the features and advantages of this unique loan type and its eligibility criteria.
Top-up loan features
Long repayment tenor–
A loan offers a lengthy repayment tenor of 10 years to 20 years or tenor remaining for the existing home loan (depending on the lender).
Quick processing and disbursal–
It doesn’t take much time to process and disburse a top up loan. This is because the lender had already assessed the borrower’s creditworthiness over the years with the existing home loan. Such advantages make this type of loan ideal to fulfil your urgent financial needs.
Need for few documents–
The documentation process for a top up loan is simpler, usually requiring only income proof and a bank account statement.
No end-use restriction–
A borrower can avail this type of funds for any purpose, unlike a home loan. For example, they can use the loan for medical expenses, sudden business needs, children’s education or home renovation, décor, travel expenses and more.
The top-up loan amount depends on the outstanding due of the primary credit.
Benefits of availing a top-up loan
In case you are wondering whether to apply top-up loan, here are some of its benefits.
- Top-up loans are offered at competitive interest rates, often at the current home loan rates or a few points higher. This makes it a much cheaper option compared to other unsecured options.
- Lenders easily approve and disburse these loans for their loyal customers.
- These offer tax benefits under Section 80C and Section 24 of the Indian Income Tax Act if used for home reconstruction or renovation.
- These loans are a reliable method of getting funds. Their quick processing time, disbursal and need for few documents make them ideal for emergency funds.
- Top up home loans often come with the option of a home loan balance transfer.
In case you want to know about eligibility criteria of these loans, here’s all you need to know about top-up loans.
Top-up loan eligibility criteria
Depending on the financial institution and a borrower’s credit profile, there are certain eligibility criteria for top up loans.
- These loans are offered only if you have an existing home loan.
- You have been steadily repaying the loan amount for at least over a year.
- You have repaid your EMIs on time for the past year.
- There are no problems with your credit report as you haven’t made defaults.
- There’s a valid mortgage with the lender in your name.
Financial institutions have made the process of loan approval much easier with pre-approved offers. These quickly tell applicants if they are eligible for financial products like home loans, loan against property, etc. You can check your pre-approved offer here by submitting your contact number and name.
Thus existing borrowers can take a top-up loan with similar rates as their current home loan and does not need to go through stringent eligibility parameters. Additionally, top up loans come with many additional advantages, as one can see above.