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What is a Top-Up loan and How it is Helpful?

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Home loan top-up is an additional loan amount that you can avail on a home loan. You are eligible to apply for a home loan top-up if you have made regular loan payments on your existing loan or if you have a running home loan. Banks such as HDFC, ICICI, SBI and Axis Bank offer same interest rates on top-up and home loans. In some cases, the interest rates offered on top-up loans can be higher than home loan interest rates.

House loan top-up eligibility:

  • You can avail a top-up loan if you have an existing and running home loan from a bank and that bank is willing to give you an additional loan on your existing loan.
  • You can apply for a top-up loan from your existing lender or opt to apply for a balance transfer loan with a top-up loan which means you shift your loan towards a new lander to avail a top-up loan on your existing loan.

In the both cases, you can apply to a new top up loan after a minimum time period of 1 year on your existing home loan.

Features of top-up loans:

Here are the salient features of top-up home loans:

  • A top-up loan can be taken for personal purposes such as vacation or wedding or to buy jewellery, or pay for the education expenses. You can also use it for renovation of your house or investing in stock markets.
  • Top-up loans are generally available for a tenure of up to 20 years or until the balance tenure of your original home loan, depending on the bank’s discretion. A top-up loan is given on the basis of customer’s profile,age, value of property, income etc.
  • Top-up loans are available at interest rates similar to home loan rates, but in some cases it may be a few basis points higher than the original home loan rate.
  • The total of the balance home loan amount and the new top-up loan amount should not exceed 70-80% of the value of the property. However, it differs from bank to bank.

Benefits of taking top-up loans:

Here is why a top-up loan is better option for you:

  • Interest rate on top-up loans are lower than personal loans or credit cards. They are in the range of 9% to 12% in most of the banks, making them the cheaper option.
  • Top-up loans are available for a longer tenure than a personal loan or gold loan.
  • Top-up loans are easily approved and sanctioned, since you are already a home loan customer of the bank and have been paying your EMIs regularly over the last 1 or more years.
  • Top-up loans can give you tax benefits provided that you use it for home repairs, construction or extension, or to fund your or your children’s education.

So, if you already have a home loan running and you are in urgent need of funds, you can easily avail a top-up loan on the same. There are several banks and NBFCs that offer top-up loans at attractive interest rates and minimal documentation.

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