A home top-up loan is an extra amount of loan taken on an already existing loan. Individuals usually opt for a top-up on loan for any emergencies or expenses such as education of children, renovating, or extending a house. Apply for a home loan top-up when you need additional funds on an urgent basis. A top-up on loan can be taken on long-duration loans such as personal loans and home loans. No security is required to get such a loan.
The method of applying for a house loan top-up is the same as a standard home loan. Documentation required for the home top-up loan is similar to that of a primary home loan, only the rate of interest is a bit more. To be eligible for the top-up home loan, one should first check their credit scores as it is offered by banks only to strong credit profile customers. Interest rates on top-up home loans begin at 7.10%. Processing fees can be up to 1% of the loan amount.
Best Home Top-up loan Interest rates:
|HDFC home top-up loan||8.30% to 9.15% p.a.|
|SBI home top-up loan||7.90% to 10.10% p.a.|
|AXIS home top-up loan||7.75% to 8.40% p.a.|
|Union bank home top-up loan||6.80 % to 7.35% p.a.|
Five points to keep in mind before applying for a top-up home loan:
A top-up home loan can be a great decision under the right circumstances when there is a requirement for additional funds on an existing loan. Following are some points that should be remembered while applying for a top-up home loan:
- To be eligible for an additional amount of loan as a top-up, make sure you have paid the stipulated no. of EMIs on your existing housing loan.
- The duration of such a loan differs from lender to lender, i.e., from 30 years to less than ten years; it depends on multiple factors such as income level, age, etc.
- Documents required to be submitted include proof of address, identity, income, etc.
- Tax benefits can be availed if the loan amount is strictly used for home renovation and construction.
- Several factors related to credibility decide the maximum amount of loan one can borrow through a top-up home loan.
Benefits of a top-up loan:
Home loan top-up offers several benefits, such as tax benefits, minimal documentation, lower interest rates, quick processing, loan tenure, etc.
1) Minimal Documentation:
A top-up home loan requires very less documentation in comparison to the standard home loan. As this loan is offered to existing borrowers, there is no requirement for heavy documentation.
2) Quick Approval:
The lender may approve your application faster as you already have an existing loan with the lender. The loan is sanctioned as soon as the verification is complete.
3) Loan tenure:
The top-up loan tenure can never exceed the tenure of the primary loan. You can either choose the tenure equivalent to the existing loan or a shorter one.
4) The interest rate or charges:
Top-up home loans may charge you a lower amount of interest and processing charges as compared to primary home loans.
5) No collateral needed:
Since a top-up home loan is a form of unsecured loan, you need not provide any security against it to the lender.
6) No restriction on usage:
The amount borrowed through the top-up loan can be used for any purpose like renovation, construction of a home, medical emergency, etc.
7) Tax Benefits:
If you are using the loan amount for renovation, construction, extension, or repair of the housing property, tax benefits can be availed.
8) Consolidated EMIs:
Some lenders allow the borrowers to consolidate the EMIs. It means to merge the standard and top-up loan amount and pay it in a single EMI. Using this method, one does not need to remember the separate EMI amount and dates.
The eligibility criterion for a home top-up loan:
The criteria of eligibility vary from lender to lender. Two major factors should be kept in mind before settling for a home top-up loan:
- One must have an already existing house loan with the lender to whom you are proceeding for the home top-up loan.
- Check your CIBIL scores, credibility, and repayment history and decide whether you are financially stable to take up such a loan.
- Age: 21 to 65 years.
- Occupation: Salaried or Self-Employed.
- Nationality: Resident or Non-Resident Indian.
- No EMI bounce should be there for six months.
- If the EMI is bounced, it should be duly paid with the next EMI.
Top-up loan Vs New loan:
Both loans have the same purpose, which is to provide financial aid. However, there are specific differences between the two.
- To apply for an instant home loan, you need to upload all the required documents. Verification of the submitted documents is done to check eligibility. The application process for the top-up loan is comparatively faster as there may not be the requirement to submit all the documents.
- The rate of interest for a new loan is comparatively higher than that of a top-up loan.
- In the case of a top-up loan, there is no requirement for security or collateral as the borrower already has an existing loan with the lender.
- Top-up loans are needed for additional cash requirements such as business expenses, personal expenses, miscellaneous expenses, etc. New loans are for a predetermined purpose.
- The tenure of top-up loans is as long as the primary loan; it may be shorter than the existing loan but cannot exceed the same. New loans are generally of longer duration.
Loans, whether it is top-up loans or standard loans, are to fulfil the financial needs of an individual. Apply for a home loan top-up when you are looking for immediate cash. Though these types of loans do not carry heavy documentation and high-interest rates, one must be aware of their need and usage.
Getting a home loan on top of an existing home loan can be burdensome sometimes. Ensure that you will be able to pay off the debt without hammering your financial health.