Buying their dream house is one of the most significant financial commitments anyone can make. However, there might be times where one needs some financial assistance to make their dream come true.
In such as situation one can apply for home loan, a credit facility offered by financial institutions that help individuals obtain a significant sum as credit to fund their property purchase or construction. Nevertheless, the additional fees while purchasing any property might be more than the actually disbursed amount.
One can opt for a top up loan to fund these additional expenses. Keep reading to know more about the same.
How can one save their investments by opting for a top up loan?
At times of financial emergency, one might consider redeeming their investments and fixed deposits to obtain the funds. This is where top up loans come in help.
A top up on your home loan acts as an add-on assistance from a lending institution. This credit facility is given on a pre-existing home loan to help borrowers meet their financing requirements without any hassle. Further, this form of credit has no end-use restrictions, making it an ideal choice for supplementary fund requirements.
Let us understand how top up loans work, with an example:
Suppose Mr. Roy takes a home loan of Rs.60 lakh to purchase a property in Delhi. Nevertheless, he needs Rs.10 lakh more to fund the additional expenses, such as registration fees, stamp duty charges, etc. This financial requirement can be fulfilled by opting for top up loan on home loan.
Features and benefits of a top up loan
Some of the features and beneficial aspects of a top up on home loan are mentioned below:
- Long repayment tenor
This credit facility is available for the remaining tenor of the pre-existing home loan’s outstanding tenor. This means, if a candidate has a repayment tenor of 12 years remaining for a home loan, they will have to repay the top up loan amount within the same time. However, this factor varies from lender to lender.
- Low interest rates
The interest rates for a top up loan are considerably lower than that of personal loans. Hence, borrowers should consider it as an affordable alternative as they can save a lot on monthly instalments and also on the total payable interest.
- High loan quantum
Financial institutions offer a high loan amount of up to Rs.1 crore as a top up on home loan. Though, one should keep in mind that the top up loan amount and the outstanding home loan amount should be within the lender’s policy.
- Tax benefits
One can claim tax benefits under Section 24(B) for a home loan to up. They can claim a maximum deduction amount of up to Rs.2 lakh, in case the top up credit is utilised for home extension or home renovation.
Eligibility criteria to opt for a top up loan
Usually, the existing home loan customers are eligible for a top up loan. However, some of the basic factors that are taken into consideration while assessing an applicant’s eligibility are as follows:
- The applicant must have an ongoing home loan
- Good repayment history on existing loans
- Appropriate age and a stable source of income
- CIBIL score of 750 or above is considered ideal
That being said, willing home loan applicants must know how to calculate home loan interest rate. He/she can take help of an online home loan EMI calculator to determine their monthly installments along with the total payable interest. This will ensure that they do not default on any payment and get a smooth borrowing experience.
One must also know that the lending partners in India extend pre-approved offers on their financial products including home loans and loans against property. These exclusive offers streamline the entire approval process and helps in quick disbursal of the loan amount.
A top up loan is a convenient credit facility in case you need additional funds in time of a property purchase. However, one must ensure to repay the top up loan amount timely to avoid financial burden.