Need for additional financing might crop up any moment even when you have already availed of a loan. In such cases, when you need additional finance, there are top-up loans which help. Top-up loans give you the additional financing you require and help you meet your financial obligations.
Though top-up loans are useful, many of you don’t know all the aspects of such loans. So, here’s a complete guide to top-up loans for your understanding.
What are top-up loans?
Top-up loans, also called top-up home loans, are additional financing options available to home loan borrowers. If you have an existing home loan in your name and you require additional funds, you can apply for a top-up loan from your home loan lender.
Important aspects of the loan
Top-up loans have some important aspects which you should know about. These include the following –
Eligibility required to avail the loan
Top-up loans are allowed to individuals who already have a home loan to their name. You can apply for a top-up loan from the lender from whom you have availed of your home loan. To get the loan you should have repaid a specified number of EMIs of your existing home loan. Your repayment history should be clean without any defaults. Moreover, some of the lenders allow top-up loans only if the property is completely built.
Use of the loan
Though a top-up loan is granted against your home loan, it acts like a personal loan when it comes to usage of the loan. You can use the loan for any type of personal or business requirements. We can take the money to use it on improving your own home. You can even use the loan to pay off an existing loan which has high interest charges.
Interest rate charged
The interest payable for top-up loans is either equal to or marginally higher than the interest rate charged for your home loan. Thus, the loan proves beneficial for paying off high interest loans as the interest on these loans are lower.
Top-up loans allow you high repayment tenures which can go as high as 20 years. However, you should keep in mind that the tenure of your top-up loan would never exceed the tenure of your home loan. So, for instance, if the remaining repayment tenure of your home is 5 years, the tenure for the top-up loan would also be 5 years even though the loan allows maximum repayment tenure of 20 years.
Time taken for loan sanction
Sanction of top-up loans usually takes some time. The loans are sanctioned within 7-10 days after you apply for them.
So, if you have a home loan and need additional funds, you can apply for top-up loans which can be used for any purpose and have low interest rates. However, know every aspect of such loans before applying for them.