Benefits of a Top-Up Loan

A top-up loan allows individuals to avail additional credit over and above a home loan. Ideally, a housing loan is restricted to purchasing residential and commercial property. 

However, buying a house levies additional expenses, such as renovation and repair costs. Availing a fresh loan or depending on savings for the said purpose can increase unwanted liabilities.

Instead, borrowers can avail top up loan that offers substantial credit without lengthy documentation. 

Apart from gaining significant funds, a customer can also avail additional benefits from the top-up loan.

What are the benefits of a top-up loan?

Individuals should know that the loan amount available against a top up loan differs from lender to lender. The loan value usually depends on a property’s market value and the amount availed against a home loan

A financial institution will assess a borrower’s credibility and repayment history before approving the loan application.

Hence, potential borrowers should maintain credibility and timely repayment for hassle-free top-up loan approval.

Nevertheless, the benefits an applicant can gain by the said credit form are-

  1. Flexible tenor

A top-up loan comes with a flexible tenor, which eases out the repayment structure. A borrower can assess his/her financial strength and select a tenor, respectively. The extended tenor usually allows an individual to make healthy savings on the repayments. 

Many lending institutions also allow borrowers to extend their existing tenor. This aids an individual to make a planned approach and make timely repayment for better credibility. 

  1. Quick disbursement

The best part about a top-up loan is its quick disbursal. Ideally, the loan variant is extended to existing home loan customers. This removes the hassle of going through stringent eligibility and documentation.

Besides, this makes the verification process quick. Hence, the loan amount is disbursed to a borrower’s account faster. This again makes the loan variant ideal for emergency expenses.

Any individual opting for a home loan balance transfer facility can easily avail a top-up loan. However, a potential borrower needs to find a lender offering the said feature. 

  1. Flexibility of usage

A top-up loan also offers multiple benefits. The primary benefit being the flexibility of spending. Unlike a home loan that restricts the fund to purchase a house, a top-up loan can be used for personal expenses.

For instance, one can use the funds to renovate their residence or go on a vacation.

  1. Affordable interest rate

Ideally, lenders levy an affordable interest rate on a top-up loan. This makes the credit form ideal for urgent spendings.

However, to gain this benefit, potential borrowers need to find a reliable lender. For instance, one can look for a lender offering an affordable top-up loan when opting for refinancing. 

In this regard, one must also check whether the lender levies a reasonable home loan interest rate and offers personalised offers.

Many prominent HFCs provide pre-approved offers to credible borrowers. These offers make the loan application hassle-free. One can find these offers on financial products like a home loan, LAP, etc.

They can check the pre-approved offers online by entering their name and contact information. 

  1. Tax benefits

Individuals can also gain tax benefits on a top-up loan provided the funds are used for home renovation or construction. Section 24 (b) allows a tax deduction on interest repayment. Additionally, one can also gain tax benefits on the principal amount under Section 80C.

However, an applicant needs to submit documents to prove that the loan amount was used for the said purpose.

These are certain features of a top-up loan that makes it ideal for customers. With a planned approach and credibility, individuals can gain substantial credit against the loan variant.

Individuals interested in availing a top-up loan needs to know the application steps.

How to apply for a top-up loan?

Individuals can follow the mentioned steps to make a quick top-up loan application:

Step 1: Visit a preferred lending institution’s website

Step 2: Selected top-up loan option from the product tab

Step 3: Fill in the application form with relevant personal and loan details

Step 4: Submit the application for processing.

Individuals may need to submit documents related to existing home loans for verification. However, this factor depends on a lender’s policy.

Thus, a top-up loan offers multiple benefits to a home loan borrower, such as quick disbursal, simple eligibility, tax benefits, etc. 

In terms of fund availability, one can approach a lender offering substantial funding. It is recommended to maintain credibility and avoid multiple debts to increase the eligibility of a top-up loan.

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By Chris Evans

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