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Five Things You Must Know About Top-Up Loans

Representative image  (Photo Credit: PTI)

Representative image (Photo Credit: PTI)

The facility of getting a top-up loan can only be availed by an existing home loan borrower and since the borrower and the bank already share a credit relationship thus, no new documentation or formalities are required.

Top-up Home Loan in simple words is an extension of an already existing home loan to address a borrower’s personal or professional financial needs. The facility of getting a top-up loan can only be availed by an existing home loan borrower and since the borrower and the bank already share a credit relationship thus, no new documentation or formalities are required.

Following are the features of top-up home loans that you must be aware of:

1. Eligibility Criteria:

In addition to having an existing home loan debt, the borrower who intends to apply for this loan must have paid a certain minimum number of EMIs with a good payment record i.e. no defaults or delayed payments. Also, there some banks or lenders from whom a top-up home loan can only be availed against completely built residential property only.

2. Interest Rate:

Usually, the interest rate applicable to top-up home loans is 50 to 100 bps higher than the existing home loan or at times equivalent to the interest rate of your home loan. Thus a top-up home loan is the least expensive loan available when compared to other available options. In addition to this, a top-up loan can also be used to pay any existing loan which has a higher rate of interest.

3. Multiple Uses:

One of the biggest pros of getting a top-up home loan, similar to personal loan is that the loan amount from the top-up loan can be used for a plethora of purposes be it renovation of your property, buying furnishings or electronic items, using it to fund your child’s education or marriage, financing your vacation or travels, and even taking care of the working capital needs of your business.

4. Payback Period:

The tenure of a top up home loan can be extended even up till 20 years however it would never exceed the duration of your home loan thus it depends on the outstanding duration of your existing home loan and other existing loans. Further, under a top up loan you also get a higher loan amount in comparison to a personal loan or Gold loan.

5. Processing Time:

Top-up loans can approximately take 7 to 10 days for the amount so granted to come at the borrower’s disposal whereas for personal loans the duration is 2–7 days and gold loans and loan against credit cards are available the same day.

first published:September 22, 2017, 19:58 IST