A top-up loan is an additional loan amount that you can take on top of your existing home loan. While a top-up is usually sanctioned for a tenure of 10 years, it is provided only a few years after the disbursal of the initial loan. That way, your lender can observe your repayment track record and assess whether it’s feasible for them to grant you another loan.

How Does a Top-Up Loan Work?

Most customers generally request top ups when they need quick cash. These funds are often utilised to add the last minute touches to a home, like furnishing and decorations. Top-up loans are also great for when you’re hit with unforeseen construction costs. Once you’ve successfully cleared a certain number of payments, you can ask your lender for a top-up loan, meaning those extended construction costs can be easily managed.

Does it sound like taking that additional loan will degrade your financial health? It’s really not that bad. In fact, there are many advantages of top-up loans over other loans. Here are a few.

The Benefits of Taking Top-Up Loans

While top-up loans carry interest rates that are a notch higher than home loans, their benefits outweigh this disadvantage.

They’re not as ‘Interest’ing as Other Loans

Top up loans are usually sanctioned at an interest rate that’s 1 – 1.5% higher than regular home loans. But compared to other loans, they’re far less expensive. Interest rates on a personal loan can go as high as 24%, and why shell out that extra cash when you can simply get a top-up loan? If you still want a Personal Loan, get one sanctioned from Bajaj Finserv, and you’ll receive the benefit of zero foreclosure charges among others.

And They can be Used in Their Stead

Unlike a regular home loan, banks do not monitor the use of a top up loan. You can utilise these funds to pay off an existing debt, fund your child’s education, or even go on a vacation. The only requirement is that you possess an existing home loan and have diligently cleared your EMIs. If you require a longer lease on your EMI payment, try Bajaj Finserv, they provide a 3-month EMI holiday to ease your financial burden.

Score Points with Lenders

Top-up loans are a great way to improve your CIBIL score. As a top-up loan shows that you are not credit hungry. This quality is effective in improving your loan eligibility with banks. This means that even if your lender is reluctant to give you a top-up loan, you can transfer your existing home loan balance to a bank that’s willing to do so. For example, Bajaj Finserv accepts Home Loan Balance Transfers and even offers ridiculously low interest rates!

No Collateral? No Problem!

Most banks have their own cap on the amount they provide for a top-up loan. This cap generally doesn’t exceed 70% of your existing home loan. But you still have an advantage; top-up loans don’t require collateral in the traditional sense! They’re an extension of your existing home loan, so they’re already secured.

If you’re in need of quick cash, but your home loan EMIs are dragging you down, take a top-up loan. You can even make use of top-up loan tax benefits and receive a deduction on the interest you pay. All you have to do is ensure that you utilise the loan to modify, renovate, or repair your home.

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