Top-up loans are credits or advances provided over and above the existing home loan. Select financers offer such loans, mostly when an individual opts for a home loan balance transfer to them. Either way, these are one of the most beneficial loans available on the lending market and can be availed only under specific situations.
Benefits of a top-up loan
The following pointers highlight the benefits of the top-up loan –
- Flexible tenor
Usually, a top-up loan facility comes with a tenor ranging between 10 and 20 years. Such an extended tenor facilitates the repayment process and allows home loan borrowers to repay the loan more conveniently. Further, certain financial institutions may allow borrowers to extend their existing tenor to facilitate easy repayment.
- Simple eligibility criteria
The top-up loan facility comes with an easy to meet eligibility criteria. Typically, individuals who have availed a home loan or the home loan balance transfer facility from the financial institution are deemed eligible. Additionally, applicants with a clear credit report would be more likely to successfully avail such loans.
- Quick disbursement
Since the additional funding option is extended to existing customers, financial institutions already possess verified documents of the applicants. Hence, the process of verification takes less time and is completed quickly. In turn, it facilitates the disbursal process and provides the much-required financial assistance to the borrowers.
- Multi-purpose option
There are many ways in which you can benefit from the top-up loan. For example, the credit does not come with a restriction on end-use and is a better alternative of home improvement loan primarily because of its versatility. To elaborate, by availing a home improvement loan, borrowers limit the use of the loan value to just meeting the repair or renovation costs. On the other hand, top-up loan borrowers are free to use the sanctioned loan value to fund any personal or housing-oriented requirement. For example, they can use the funds to furnish their residence and improve its interior decoration or even use it to fund their vacation.
- High loan value and affordable interest rates
Borrowers often avail a high loan value through this credit option and can fund their requirements quite easily. Regardless, it must be noted that the loan value depends on the market value of the mortgaged property and the loan amount availed.
- Tax benefits
Individuals who have utilized the top-up loan to meet the expenses of home renovation or construction are entitled to claim tax benefits. In such a case, they would be allowed to claim a tax exemption on interest pay-out under Section 24(b) and the principal amount under Section 80C. Notably, individuals must submit documents that serve as proof that the loan value availed was used for home construction. Note that such exemptions are also available on housing loans as well.
Hence, it can be said that benefits like simple eligibility criteria, quick disbursal process, affordable interest rates and tax exemptions make the top-up loan a viable financial product. Consequently, individuals should learn how to make the most of these features and meet their financial requirements with greater convenience. Make sure you have a clear understanding on all you need to know about top-up loans and home loans before applying for either.
Additional Read: All You Need to Know About Top-Up Loan on Home Loan