Many people opt for a home loan as their preferred method of acquiring their dream home as real estate prices keep rising. However, frequently the loan amount acquired may not be sufficient to cover other expenses like registration fees, house furnishings, renovation charges, or property upkeep expenses. Top-up loans become relevant in this situation. Top-up loans are a sort of financial assistance that enables borrowers to receive additional credit on top of their principal home loan balance and are provided by various financial institutions and banks.
Let us have a look at the myriad of benefits of top-up loans that one can avail and ease their financial burdens:
Benefits of Top-Up Loans
Here are the various advantages of top-up loans:
Longer Repayment Periods: Unlike personal loans, top-up loans benefit from longer repayment periods. These tenures can last up to 20 years. This makes paying back the borrowed money easier.
Lower Interest Rate: Compared to personal loans, top-up loans are supplied at an interest rate that is much lower. In emergency situations, choosing a top-up loan through a mortgage loan is the preferable option. Comparing interest rates from well-known organisations will help you better grasp the differences.
Greater Loan Amount: Banking institutions offer the option to take out top-up loans for bigger loan amounts, up to Rs. 50 lakhs. However, the combined sum of the top-up loan and the ongoing mortgage loan must abide by the bank's policy guidelines.
No Additional Security: There is no need to submit additional collateral or security because a house loan top-up is received in addition to an existing home loan.
Wider Use: Top-up loans have a wide range of uses, including paying for education, weddings, business, construction, and home renovations, among other things.
Efficient Processing: Since a top-up loan normally does not involve any additional background checks or paperwork for processing, getting one takes very little time and effort.
Eligibility Criteria for Top-up Home Loan
The standards established by the bank from whom you have obtained or are seeking a house loan are often linked with the eligibility requirements for a home loan top-up.
While different banks may have different requirements, it is important to consider the following significant factors:
EMI Bounce: In the preceding year, there should not have been more than one EMI bounce. Before the subsequent EMI is due, any unresolved bouncing EMIs should be dealt with.
Repayment in Full of Existing Mortgage: The existing mortgage must be paid off in full within six months.
Repayment History: For top-up loans paired with balance transfers from other banks' home loans, a clean repayment history of at least one year is typically required.
Other than this, there are quite a few additional general eligibility requirements, which may differ from bank to bank:
Age: The age of applicants must usually be between 21 and 65. Moreover, Indian citizens, either resident or non-resident (NRI), are eligible for a top-up loan.
Employment Type: Both salaried and self-employed people are eligible for this type of loan.
However, it is important to remember that these criteria are intended to be broad guidelines only. The bank or the lending institution may have varied and specific qualifying requirements. So, one must consider speaking with their bank to learn about their eligibility requirements for home loan top-ups.
Conclusion
Top-up loans provide significant benefits to borrowers looking to ease their financial burdens or fulfil various needs while already having a home loan in place. We hope that these insights will be quite useful if you are contemplating applying for a top-up loan on your existing home loan.
