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5 reasons why Home Loan Top-up is better than a Personal Loan

3 Min Read
Author - Sanyam Jain
5 reasons why Home Loan Top-up is better than a Personal Loan

At some point in time, we all need some funds for expenses that are either unforeseen or are unplanned. Although there are numerous options, it is important to know what is the best option available. For an existing Home Loan borrower, the best option to get extra funds is to secure a top-up loan rather than opting for a new personal loan.

There are several reasons why Top-up loans are better than Gold Loan or Personal Loan .

Let us look at the top 5 benefits of Top-up Home Loans:

  • Funds with no restriction on end usage

Top-up Home Loans do not have any sort of restriction on usage. A borrower can use this loan amount for whatever purpose he/she needs to - buying a car, remodelling the house, education costs, etc. This absence of end-usage restriction provides flexibility and makes it a much more desirable option than a loan against credit cards or a personal loan.

  • Lower interest rate

The interest rate of Top-up Home Loans is comparatively much lower than a personal loan or gold loan. The interest rate is almost equal to the interest rate on Home Loans, thus making it the cheapest credit option for an existing home loan borrower. While Personal loan interest rates range between 10.25% and 24% p.a., Gold Loan interest rates range between 9.5% to 26%. Compared to these, Top-up Home Loan interest rates range between 6.85%-9.4%.

  • Longer repayment tenure

Another major benefit of availing a Top-up Home Loan is the longer tenure of repayment. The tenure of a Top-up loan depends on the remaining tenure of the underlying home loan. For instance, if an existing home loan has a tenure of 12 years still remaining, then the borrower can avail a top-up loan with a tenure of up to 12 years. On the other hand, alternate options like personal loans have a tenure of up to 5 years. Since you get a longer tenure with Top-up loans, it reduces the EMI burden and lowers the EMI to quite some extent.

  • Higher loan amount

In the case of a personal loan, you can borrow an amount in the range of Rs 50,000 to Rs 40 lakhs, depending upon your income and repayment capacity. While the loan amount in Top-up Home Loans can go even over Rs 50 lakhs. So, if you want a large amount of money at an affordable rate, then a top-up loan is the best option.

  • Tax benefit

While the interest and principal repaid on a personal loan, a gold loan , or a loan against credit card are not qualified to give you any tax benefit, a home loan top-up can. Along with all the other benefits, a Top-up loan also provides tax benefits. This is especially effective if the loan proceeds are used for the construction or purchase of a new property.

A Top-up loan is undoubtedly a much better option than all the other credit alternatives. But one thing that goes against it a bit is the longer processing time.

While Loans against credit cards are usually disbursed within the same day and personal loans within 2-5 days, the processing time of top-up home loans takes about a week or so.

Despite a long time in processing and documentation, the benefits of top-up loans far outweigh the other options. Also, if you are a bank's home loan loyal customer (i.e. you are not a defaulter in paying the EMIs), your top-up loan application would be easily approved and disbursed.

Now that we know why Top-up loans are better, let us see what is the eligibility criteria for availing a Top-up Home Loan:

  • Consistent repayment record
  • Have already paid a minimum number of home loan EMIs

If your existing home loan lender does not give you a home loan top up, you can transfer your loan with some other bank offering a top-up loan facility along with a balance transfer.

Now, another question is: What are the documents required to apply for a top-up loan?

Let us find out:

  • Identity Proof: Passport, Aadhaar card, voter ID, PAN card, driving license
  • Income Proof: Salary slips for 3 months (in case of salaried applicants), bank statement and Passport-size photographs.
  • Address Proof: Rental agreement, passport, utility bills, etc.

Of all the options available, a Top-up home loan is the best. Since all the other options are far more expensive and do not offer the kind of benefits that Top-up does, it is probably time for you to go from What is a top-up loan to How to get a top-up loan.

About Author

Sanyam Jain
Highly motivated and utterly skilled, a young and zealous writer trying to follow his passion for the love of the English language. Written for different niches for over three years, now writing for the finance sector. When writing for a financial product you learn a new thing everyday.

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