What Are the Benefits of Top Up Home Loan?


Home loan refers to a long-term commitment that goes up to thirty years. Such loans are an excellent way to avail cheap funding to become a homeowner. A home loan even provides other additional advantages to you as a borrower. One such option is the availability of top up home loans. 

A top up loan is a type of credit option offered over and above your present home loan. A top-up loan proceeds can be within the thorough limit of your prevailing home loan. This limit is determined by the home loan lender depending on your latest credit score and repayment past record. You can use the online SBI home loan EMI calculator or HDFC home loan EMI calculator to compute the change in the EMI that you must meet on time. 

A top up loan is the simplest way to get credit for distinct needs, may it be business, personal or medical exigency. There is zero restriction on how you can use the funds availed through the top up home loan. Whether you are looking to furnish your home, go on an international trip or witnessing any unexpected medical exigency, whatever the reason is, you can opt for the required funds from top up home loan. 

Very simple eligibility parameter – 

  • The basic eligibility for availing the top up loan is, you require having a home loan with the same lender. 
  • You need to even have the home loan proceeds that is not over the amount available in the top up loan. 
  • You will not require submitting vast documentation as financial institutions already hold all details linked with your home loan. 
  • The age limit is the same as a home loan so you will be eligible naturally. 
  • You need to hold a pragmatic repayment record with a home loan, that is something you must be aware of. 
  • Bank will review your recent score so make sure you hold it. 

Low rate of interest – 

The rate of interest on top up home loans is generally the same or slightly higher as compared to the existing home loan rate of interest. Thus, a top up home loan comes with the potential to save you money in terms of rate of interest. This is especially helpful for the big-ticket expenditures like home or new car renovation. Particularly, if the expenditures are unexpected or unplanned. Also, the time involved in processing the top up home loan is generally lower as compared to other loans so you can get the funds instantly. 

Zero restriction on the usage of the fund – 

Top up home loan is the same unsecured personal loan that does not limit the purpose for which the fund was availed. It may be used for any reason like education, business, vacation, home renovation, etc. You might well go for the personal loan, which provides similar flexibility, however a top up loan is generally a better choice owing to the involvement of lower rate of interest and processing fees. 

Flexible repayment choices – 

Generally, with a top up home loan, you can avail a repayment tenure same as your original home loan. It is not the scenario with other credit options like gold loan or personal loan. With a top up home loan, repayment tenure is dependent on the tenure left upon your original loan. It means that if you hold a home loan repayment tenure equaling sixteen years, you can avail the top up home loan repayment tenure of sixteen years also. This is a good feature as it infers that you can get the funds at a low rate of interest with higher repayment tenure. 

Tax benefits –

Have any idea that you can avail the tax benefits on your top up home loan? Yes, you simply can claim tax benefits on your top up home loan, in case it is used solely for renovation, construction, repairs, extension, etc. If the loan is utilised to buy a self-occupied property or home, the maximum deduction on tax available would be Rs 30,000. There’s zero cap on the deduction if loan was utilised for buying a rental property. Both, however, are subject to thorough tax deduction equaling Rs 2 lakh on the interest constituent of the home loan. 

Overdraft option – 

A current feature included in most products of home loan is the overdraft option. Using this option, you can make payment of the interest just on the fund you use. This is the same as the credit card option wherein you must pay the interest only on the amount that you use if you miss out on making the repayment on time. This feature assists you to make the payments on home loan with zero need for incurring any sort of penalty. It even assists you to avoid the presence of any additional late payment fees. In this way, you can use home loan funds for meeting any of your expenses and repay the same outstanding due when you get the required money in your bank account. 

Ending note – 

Top up home loan is an excellent home loan option available in our country. It provides a wide range of advantages to you as a borrower looking to get low-cost financing for distinct purposes. Also, it is beneficial to those who are emergency funds. With its low rate of interest and simple repayment feature, top up loans can be an advantageous option for a lot of people in need of instant funds at a low cost. 

Frequently asked questions – 

What’s the rate of interest on a top up home loan?

Top up home loan rate of interest is the same as the rate of interest available on the original home loan. This ranges anywhere between 8-12 per cent. Also, it is determined depending on the recent score and past repayment record. 

What’s the repayment tenure on top up loan?

Top up loan has the same repayment tenure as the original home loan. In the case you have a repayment tenure of ten years on a home loan, then your top up home loan would be repaid in the same ten years tenure.


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