The term Top-Up Loan is new to people and those planning to avail homeloan are keen to know more about this loan. So, let us explain the intricacies of the same.
What is Top-Up Loan?
This is an extension of the current homeloan which a person avail to fulfill his/her financial need for buying a home. However, one can also use a top-up loan for various other purposes. Only a current homeloan borrower is eligible for this loan because the bank already knows the financial condition, person’s annual income and repayment tenure of the ongoing loan. Thus, the financial institution won’t need to assess various documents time and again.
Essentials for Availing a Top-Up Loan
1. Payment Record
Apart from availing a homeloan, the person must also have a track record of paying timely EMIs for a sufficient number of times. This means that the person should not be a defaulter and must not make delay in payments. In fact, some banks also offer a top-up loan for a fully-constructed residential unit.
2. Rate of Interest
The interest rate of a top-up loan is either half or equal to the rate of interest you are currently paying for the availed homeloan. In short, it’s better to opt for a top-up loan in comparison to personal and credit card loans. In fact, the equivalent or a little higher interest rate of this loan is better as you can pay-off other loans which are availed at a higher interest rate.
3. Repayment Tenure
A payback time for a top-up loan is of two types. Firstly, it has a fixed tenure of 20 years for repayment. Secondly, the repayment period depends on the outstanding payment duration of your current homeloan. A person is also eligible for an increased loan amount under the top-up loan in comparison to the personal or other kinds of loans that are available in the market.
4. A Multiple Purpose Loan
The best thing of a top-up loan is that you can use of this loan amount to fulfill the financial need for renovating a home, buying property, financing holiday/vacation trip, child’s education or for the wedding of your kids.
5. Tax Benefit
A person can enjoy tax rebate by availing a top-up loan. The only requirement to avail tax deduction here is to produce the receipts/documents which clearly state that the amount of this loan is solely used for the purpose of residential construction or renovation of the property.
The conclusion is that it is better to apply for a top-up loan as it offers multiple benefits and better amount as and when required.