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Everything you need to know about a Top-up Loan

Opt for a Top-up Home Loan over a personal Loan because you will get the loan at a much lower interest rate than a personal loan.

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Everything you need to know about a Top-up Loan

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  1. Everything you need to know about a Top-up Loan

  2. A home loan top-up, true to its name, is a facility of availing further funds on an existing home loan. • When you have a loan that has already been disbursed and under repayment and if you need more funds, why go about the loan formalities all over again? • Thus, the purpose of a top-up loan is to make superfluous loan dispersal on a pre-existing one absolutely hassle-free by dismissing the need for more documentation.

  3. You can simply avail additional funding on the same loan thereby minimizing time, effort and cost. • Your existing basic documentation and collateral is sufficient to provide you more funds! • You just need to provide minimal papers to avail the top-up loan.

  4. When to use a Top-up and the Conditions Applied

  5. When would you Opt for a Top-up Loan?

  6. For instance, you had taken a housing loan of Rs.40 lakh five years ago for a term of 15 years. • Your current outstanding on the loan is 35 lakhs. • Now, you want to carry out major renovation in your house and you need a loan to carry out such renovation. • You are thinking about a personal loan from a finance institution. • This is when a Top-up loan over your Home Loancomes into picture.

  7. The Conditions Applied

  8. There needs to be a pre-existing Housing Loanwith the financial advisory firm or institution to avail the Top-up loan. • Requirement of at least a 6-12 months repayment record on the existing home loan. • Permissible top-up Loan amount is 70-75% of the present market value of the property less the outstanding home loan amount.

  9. Benefits of a Top-up Loan

  10. Apart from being hassle-free the top-up loan has various other benefits. • Its primary benefit is that it is offered at a lower Home Loan Interest Rate as compared to a Personal Loan.

  11. Secondary Benefits of a Top-up Loan

  12. To add to it, the icing on the cake is that you are not monitored by the company with regards to the usage of suchtop-up Loan proceeds. Therefore, you can use the fund as you wish! • You can use the funds for home renovation as mentioned earlier, paying off a personal loan, children’s education etc. • The finance institution might only ask for an undertaking specifying the exact use to ensure no illegal usage of thetop-up loan funds.

  13. Tax benefits of a home loan top up are dependent on the purpose for which the loan is utilized. • You will be eligible for tax benefit under Section 80C (for principal repayment) and under Section 24 (for interest payment) only if you use the loan proceeds for purchase or construction of a new residential property. • However, if the top up fund is used for any other purpose you shall not be eligible for any tax benefits.

  14. Thank You

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