A financial emergency can come at any stage, leaving you highly vulnerable. However, the situation is particularly grave when servicing a home loan. This is the period when you require assistance in shouldering your responsibilities. One financial tool that can help you manage your situation is a home top-up loan.
Continue reading if you are in a similar scenario and require financial assistance to cover additional costs for an emergency.
What is a Top-Up Loan?
Financial institutions provide a top-up loan facility to the existing customers that allow them to borrow money in addition to their current house loan. As you are already a bank customer, it is a straightforward method for obtaining a loan without any documents.
A home top-up loan is a simple way to secure funds. The customer is already servicing a loan with the bank, and the lender has to increase the loan amount. The funds generated can be used anywhere from purchasing furniture to constructing, renovating, or extending the property or children’s marriage, medical emergency, etc.
What are the Benefits of a Home Top-Up Loan?
Some of the top-up loan benefits for a borrower are mentioned below.
A top-up loan is simple, easy to get, and requires minimal paperwork. This is because the bank has already analyzed your creditworthiness. If you have been a customer for more than a year, you will acquire a loan without documents because the lender has your records. However, your bank may require additional paperwork before sometimes extending the loan amount.
Any working person can benefit from a top-up loan irrespective of work profile. Everyone is eligible to use the service, whether you are a salaried employee in a government office, a private enterprise, or self-employed. However, not all applicants are eligible for a home top-up loan. After confirming your repayment capacity and track record, a bank will grant you a loan. Banks will issue the funds after collecting a processing fee if the credit history is favorable.
Top-up loans are granted to customers for the remaining term of their existing house loan or a duration of 10-20 years. However, it depends on the lender and varies accordingly.
Attractive Interest Rates
Top-up loans have low-interest rates that are almost comparable to home loans. Moreover, these interest rates are typically lower than those paid on personal loans. Sometimes, your bank may even waive specific fees/charges to make the deal more appealing.
You can employ a top-up loan to modify or build your home or pay for personal needs such as your children’s school, etc. You can also use the loan money for business purposes. However, the funds cannot be utilized for speculation.
Tax advantages on home top-up loans are available if the money is spent solely for the development, repair, renovation, or expansion of your residential property. Here, the maximum tax deduction permitted is Rs.30,000. The loan’s principal amount and interest portion will be tax-deductible if the additional funds are used to construct or purchase a new property. This is subject to the limitations imposed by Sections 80C and 24. (b) of the IT Act.
A top-up loan is a simple way of dealing with a financial emergency. Existing home loan customers will find the lending process quick and quick. Furthermore, if you are not an existing bank customer, you can apply for a balance transfer (BT) facility and a top-up option. The documentation is often far more relaxed, and the interest rates are kept low to encourage clients to choose the top-up loan.