All you need to know about Top up Loans on Home Loans
Easy availability of Personal Loans has made it convenient for customers to take care of their financial needs. That said, Personal Loans come with a higher rate of interest and might end up straining your finances in the long run. Hence, it’s better to opt for Top up Loans on Home Loans, if you have one, as they can be availed easily and come with a much lower rate of interest.
What’s a Top up Loan?
A Top-up Loan is sanctioned on the basis of your existing Home Loan and comes with a separate rate of interest and tenure. If you’ve been successfully paying off your Home Loan EMIs and have still got a couple of years left on the tenure, you’re eligible for a Top up Loan.
Why should you go for it?
If you’re unable to meet your financial needs, a Top up Loan can come as a sigh of relief. Usually, Top up Loans are a better option than Personal Loans as the latter comes with a higher rate of interest.
If you avail a Top up Loan from the same financial institution that sanctioned your current Home Loan, then the documentation process will be minimal and the disbursal faster. Additionally, some NBFCs like Bajaj Finserv allow you to apply for a Top up Loan online, which is approved within a couple of minutes.
When you’re applying for a Top up Loan, you don’t have to disclose the purpose for doing so. You can use it for any personal expenses like funding your kid’s education or buying gadgets. However, if you invest the loan amount in home improvement, then you can claim a tax deduction on the interest paid under Section 24 of the Income Tax Act.
Another benefit of taking a Top up Loan is that you can use the money from it to close your existing Personal Loans or high interest unsecured debt. Why? Because a Personal Loan is an unsecured debt and hence you have to pay high interest charges while clearing it. So, if you want to save some money, clear off any unsecured debt that you might have with the help of a Top up Loan.
You can’t apply for a Top up Loan if you haven’t taken a Home Loan. However, if you’ve already taken a Home Loan, you’ll be eligible for a Top-up Loan only after you’ve paid off a few EMIs, keeping in mind that you should not have defaulted even once. Further, financial institutions will consider your Top up Loan application only if you have a clean repayment history.
If your existing Home Loan has a high rate of interest, then you can lower it by opting for a Home Loan Balance Transfer. Some institutions like Bajaj Finserv offer a combination of Home Loan Transfer and Top up Loan to help you meet your financial goals faster and more effectively.
What’s the Collateral?
Since your Top up Loan would be an increment to your existing Home Loan, you wouldn’t be required to submit any collateral. That said, failure to pay installments of this loan on time would be similar to falling back on a Home Loan. If you default consistently, your property can be taken over by the lender.
Now that you know how convenient getting a Top up Loan is, you need not hesitate to take the plunge when you face a financial crunch. If you need more clarity, you can take professional assistance from financial experts to gain better insights into the loan application process.