A Home Loan is a long-term financial commitment. A typical Home Loan can last from 15 to 30 years. Besides, Home Loan amounts can be quite high. The average borrower bears a cost of Rs 30 lakh. But the average amount of Home Loan that you get could vary. For starters, it would depend on the city where you are buying your home or property. Sometimes, unexpected expenses can also come up in relation to your property. Your original Home Loan amount may not cover these expenses. What can you do then? You can take a top-up loan.

What is a Top-up Loan?

Suppose have already taken a Home Loan. Now you need some extra money, so you take an extra loan. This extra loan is a top-up loan. You can get such a loan if you meet a shortage in your original Home Loan amount.

What is the Tenure for a Top-up Loan?

The loan tenure for a top-up loan is around 10 years.

When Can You Get a Top-up Loan?

When will your Home Loan lender approve a top-up loan? The lender will extend you such a loan only after you have paid off a part of your original Home Loan. So, you need to wait a few years before applying for a top-up loan. Why is this needed? Keep in mind that banks and NBFCs want to track your repayment habits. Have you already paid off a part of your outstanding Home Loan amount? Your Home Loan lender will consider this. The top-up loan helps you use this margin to get extra funds. This extra amount helps you meet your financial needs.

Are you steady and disciplined in your repayments? Then you should have no problem getting a top-up loan.

What is the Eligibility Criterion?

Do you need a top-up loan? You will have to meet the following eligibility criteria:

  • You need to have an existing Home Loan. Then you can take a top-up loan on it.
  • Need a top-up loan? First approach your existing Home Loan lender.
  • Suppose your original Home Loan lender does not approve your top-up loan. Then you can get your Home Loan refinanced to a different lender.
  • Your top-up loan amount cannot be more than 70% to 75% of your property’s current market value. Also, it cannot include the outstanding amount on your Home Loan.
  • Banks and NBFCs usually do not ask for security for a top-up loan.
  • A top-up loan is usually offered to salaried individuals.
  • You need to provide the following documents for a top-up loan:
    • Proof of Identity: These include your passport, voter’s ID card, driving license, PAN card, or Aadhaar card
    • Proof of Address: These include your passport, voter’s ID card, driving license, or Aadhaar card
    • Proof of Income: You will have to show your latest Form 16. Or provide your salary slips for the past three to six months
    • You will have to show your bank account statements for the past six months
    • You will have to fill in an application form
    • You will have to give a copy of your passport-sized photograph

What are the Interest Rates and Charges for Top-up Loans?

Top-up loan interest rates are usually lower than Home Loan interest rates. Top-up loan charges are usually the same as Home Loan charges. They may differ from lender to lender. But the general charges are as follows:

  • Processing fees on a top-up loan
  • Late payment penalty and additional interest
  • Penalty on EMI bounce

In addition, most top-up loans come with certain benefits:

  • Zero foreclosure charges
  • Zero loan statement charges
  • Zero interest and principle statement charges
  • No part prepayment charges

How to Apply for a Top-up Loan

Do you already have a Home Loan? Then you can apply for a top-up loan after regularly paying the EMIs for one year at least. Different lenders have different conditions. Many banks and NBFCs allow you to apply for a top-up loan online. This makes the process simple and hassle-free. But suppose the online facility is not available. Then you can go to the nearest branch of your bank or NBFC. Start the process there.

The Bottomline

Indeed, a top-up loan is the perfect tool to get extra funds. Just make sure you meet the eligibility criteria before applying. Make sure to provide the required documents. That is all it takes. So, if you need funds for an emergency, take advantage of the top-up loan facility.

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