Everything You Need to Know About Top-Up Loans

A top-up loan, as the name indicates, is an amount that is borrowed to supplement an existing home loan. When a medical emergency or an unexpected cash crunch situation crops up, we usually think of taking a personal loan or selling assets like gold or property for immediate relief. However, if you already have a home loan, then financial experts suggest taking a top-up loan, which is more beneficial.

Here’s a short and simple guide to everything you need to know about top-up loans.

Top-up loan features

Most banks and financial institutions offer top-up loans, and it is a reasonably simpler process to get one. 

●     Quick approval – Applying for your top-up loan from the same bank as your existing home or personal loan ensures a fast approval. The bank has already done its necessary checks and is familiar with your credit history

●     Minimal documentation – Again, due to your existing relationship with the bank, you can get a top-up loan with minimum documents. 

●     Longer durations – Top-up loans have the advantage of having longer tenures than gold loans, personal loans, and vehicle loans.

●     Tax benefits – You can claim tax benefits on a top-up loan depending on the usage.

●     Lower interest rates – Compared to vehicle or personal loans, top-up loans have a lower rate of interest ranging between 9% and 12%.

●     No collateral – Top-up loans can be availed without the need for any collateral or a guarantor.

Points to remember

  • You need to have an existing home loan and flawless payment history of at least a year to be eligible for a top-up loan.
  • Top-up loans can be used for multiple purposes, from funding your child’s education to expanding your business to covering emergencies.
  • Top-up loans need to be repaid within 20 years or the duration of your existing loan repayment.
  • On average, you can only borrow up to 75% to 80% of the value of your property. However, the percentage differs from bank to bank.

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