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Home loan borrowers often require funds to meet extravagant lifestyle expenses such as personal travel, wedding, child’s education, car purchase, or a medical emergency. Applying for a top-up loan on the existing housing loan is one of the most efficient solutions to enjoy instant finance.
What is a top-up loan?
The top-up loan is a provision that allows you to increase your availed home loan amount. A top-up loan is an easy solution for an immediate fund requirement since there is no need to apply for a separate loan.
Why is a top-up loan a good idea?
- Lower interest rates
The interest rate for personal loans is generally between 9% and 24% per annum based on the borrower’s credit profiles. The interest rates for credit card loans are also a little toward the higher side. However, when it comes to top-up loans, the interest rates are equal to or are slightly higher than the existing home loan interest rates. Consequently, top-up loans are one of the affordable loan options for home loan borrowers who require more funds at lower interest rates.
- No restriction on end usage
While it is mandatory to have a home loan to avail of a top-up loan, there is no restriction on where you use the funds. You can use the proceeds to purchase a car, finance your child’s higher education, plan travel, etc. The only exception is to the use for speculative purposes.
- Longer repayment tenure
The tenure for top-up loans is determined by the residual tenure of the existing home loan. For example, if the tenure of your existing housing loan is 10 years, the tenure of your top-up loan can also go up to 10 years. A longer tenure helps to reduce the EMI. Therefore, opting for a top-up loan instead of a personal loan or credit card loan helps in reducing the EMI burden. You can use an EMI or home loan calculator to understand how much you will need to pay.
- Fast processing with minimal documentation
The application process of a top-up loan is simple and does not require too many formalities. Lenders can disburse top-up loans within the same day as of the loan application.
Eligibility criteria to obtain a top-up loan
There are certain eligibility factors under which an individual can apply for a top-up loan. These include:
- You must have an existing home loan with a bank.
- You should have a clean EMI repayment record for the last year, which means you should not be a defaulter. You should have made timely payments.
- Your credit report should be favorable.
- You should have provided a valid mortgage in the name of the bank.
Conclusion
The need for a top-up loan can arise at any time. Several lenders provide a wide range of hassle-free loans for all age groups. The easy-to-use home loan EMI calculator allows you to quickly find out the EMI (inclusive of loan interest) you will be eligible to pay each month to repay the loan.
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