If you have taken a home loan and need money for other purposes, and are considering a personal loan, you should learn about a top-up loan. A top-up loan can be added to your home loan. It is essentially a personal loan but comes with lower interest rates compared to personal loans.
Personal loans typically have an annual interest rate of around 11-15%, whereas a top-up home loan can be available at around 9-12% annual interest rate. Additionally, top-up loans offer a longer tenure, making it easier to repay the loan installments. Here are some essential details about top-up home loans.
Why Top-Up Loans are Beneficial
- Since it is added to your home loan, no additional security or guarantee is required.
- Top-up loans come at lower interest rates, and the loan processing fees are not very high.
- There are no hidden charges associated with top-up loans.
- There is no pre-payment penalty if you repay the loan earlier than scheduled.
Ample Repayment Time
Top-up home loans provide a significant repayment period, which can be as long as the tenure of your home loan. According to SBI’s website, a top-up home loan can be taken for up to 30 years. You can use a top-up loan for home repairs, children’s education, a daughter’s wedding, or any other purpose. If used solely for home construction and renovation, you can also benefit from tax deductions.
Also read: Do Not Ignore These 6 Things When Taking a Personal Loan
Loan Terms and Conditions
Before approving a top-up loan, the bank reviews your loan repayment record. If your EMI payment record is good, getting a top-up loan is easy. The bank also considers the total home loan amount and the market value of your property. The total amount of a top-up home loan can be up to 70% of your property’s market value. However, rules may vary from bank to bank.
How to Apply for a Top-Up Loan
You can apply for a top-up loan by visiting the bank from which you took your home loan or through the bank’s website. Since the top-up loan is added to your home loan, you will need to pay the monthly installments for both the home loan and the top-up loan.