Benefits and conditions for top-up loan on your existing Home Loan
Top up loans as the name suggests are an add-on loan given to an existing loan borrower. Top up Loan is offered by both banks and NBFCs for only those clients that have a home loan with them. Top up loans can be used to counter any financial requirements related to the house or any other. Since the home loan amount is directly paid by the bank to the developer, any other expenses related to the property can be managed through a top up loan. . Let us take a look at the aspect of top up loan and its availability, usage, advantages and disadvantages.
Let us see the case of Mr Rohan, who managed to get top up loan an additional finance facility. Rohan was well into the fourth year of his home loan with regular repayments. With a financial incentive at work, Rohan decided to use the money to buy a car. As Rohan had not bought a parking space while purchasing his flat, now with most of his money going towards home loan repayments and other financial needs, sparing enough money to buy a parking lot seemed troublesome. It was his friend who told him about the top up loan facility. Rohan met the manager of the bank with whom he had a home loan and was sanctioned a top up loan to buy his parking lot.
Who is eligible for top Up loan?
Top up home loan is approved only after the borrower has started repaying his or her home loan repayments and has repaid substantial amount of the loan. Usually a top up home loan is offered only after a few years of the home loan disbursal. If the repayments on the home loan are defaulted at any time, chances of a top up loan are reduced significantly. You are eligible for top up loan and get more money on the basis of your repayment record and the current property value. Top up loans work on the basic principle that since an existing home loan borrower has started reducing the outstanding amount of the loan margin money in way of a top up loan can be extended to the borrower without much risk.
Advantage of top up home loan
The biggest advantage of top up home loan is that the amount raised can be used for any financial requirement. Be it renovation or repair of the home or purchase of primary or additional parking space to even cover for education or medical expenses, there is no bar on the usability of top up home loans. Since top up loans are offered to existing home loan borrowers, the loan facilitation process is quick.
The interest rates offered on top up loans are quite low compared to personal loans making them a very lucrative fund raising option. Another big advantaged of top up home loans is the fact that they are liable for tax benefits on interest paid during the financial year. In case the top up loan is used exclusively for repair, renovation and construction activity of the home, tax benefits can be extended to the principal amount as well.
The disadvantage is that top up home loans are only available to existing home loan customers with good repayment record. Existing home loan customers with a poor repayment track record are also unlikely to be offered a top up home loan. The bank or NBFC has the final authority in allowing or rejecting a top up home loan request.
