In situations where an individual may need funds for immediate use, they may come across a variety of options to obtain the credit they seek either in the form of personal loans, consumer loans, car loans, home loans, education loans and so on. One method that may benefit them in certain cases in the long run comes in the form of a top up loan. Top up loans are additional loan amounts to existing home loans, personal loans or even vehicular loans in some cases, lent by banks and other financial institutions to borrowers that can be used for almost any purpose of their choosing.
This is a great way to obtain funds for immediate use without having to go through the hassle of a full loan application process again. Top up loans may have longer tenures and lower interest rates depending upon the borrower’s credit history and the financial institution involved, which may make them more economical alternatives to other types of loans in some scenarios. The loan amount, interest rate, tenure and other details are entirely dependent upon the borrower’s existing loan and their credit history as well as their repayment history on the existing loan.
Things To Consider When Evaluating The Benefits Of A Top Up Loan :
Some points to note when applying for a top up loan top up loan:
Tenures: Top up loans on existing personal loans may come with longer repayment tenures ranging from 10 to 15 years or up to the expiry of the original loan tenure. Top ups on existing home loans may allow for even longer tenures of 20 years or up to the end of the term of the home loan itself as they tend to have longer tenures. This allows for lower EMI payments in comparison to a personal loan and allows for a more relaxed payment schedule, negating the burden of dealing with multiple loans with high interest rates.
Flexibility Of Use: These types of loans can be used like a personal loan for nearly any purpose ranging from education to purchases, renovations, medical emergencies as well as weddings. There are almost no limitations on what the sum can be utilized for. The Top-up loan on Home loans offered by Bajaj Finserv on the Finserv MARKETS portal offers a high-value amount that can be used to meet any financial requirements from education to marriage.
Eligibility & Ease Of Application: There is no need to worry about having to undergo the loan approval process all over again if you have a good repayment history and credit score. Your existing relationship with the bank or concerned financial institution forms the basis of how your top up application is processed. However, this does not guarantee that you will be approved for a top up. However if you have made regular EMI payments in the past year on your existing loan and possess a good credit history, you stand a good chance of being approved.
Amounts & Interest Rates: Depending upon your repayment history and relationship with the vendor, you may be offered a top up at a relatively lower interest rate on top ups for home loans than if you had applied for another personal loan. Top ups on personal loans and home loans generally do not exceed 70% -80% of the original sum, though the Top-up loan facility offered by Bajaj Finserv on the Finserv MARKETS portal can provide a higher sum if the property value is high.
Other Charges: Top up loans are generally unsecured, particularly on existing personal loans so there is no additional collateral requirement in most cases. In cases involving personal loans which are inherently unsecured, the lender may provide a top up at a slightly higher interest rate than the original loan.
Tax Benefits: An added benefit of top up loans is that they allow for tax deductions on the principal and interest repayments under Sections 24 and 80C of the Income Tax Act, if the loan is used for the purchase or renovation of a house. If the loan is used for any other purpose, no tax benefits can be availed.
Top up loans may be a great way to gain credit on top of an existing loan in many cases due to some of the aforementioned benefits. They can be utilized to meet a variety of needs like a personal loan while avoiding some of their drawbacks. However, it is important to consider and compare all options available to you before settling upon a course of action as they may not be ideal in every case.
Top ups on home loans are available on the Finserv MARKETS portal where you can also determine your eligibility by means of the easy to use home loan top up calculator. Availing the offering through the portal ensures that your application process is easy and requires minimal documentation, your loan is customized to your needs and the process remains entirely transparent.