All You Need to Know About Top-Up Loan
Jun 12, 2018 Home Loan
As the name suggests, top-up loans are the additional loan amount that you can take on you already existing home loan. If the loan borrower is regularly making the repayment the loan amount and has been doing it regularly, then the borrower can avail the top-up loan facility by accepting the bank’s terms and condition.
Eligibility for the top-up loan
Anyone who has already taken a home loan is eligible to avail a top-up loan. But the borrower should be in the process of repayment of the home loan amount taken from the bank at least for a period of one year or as stated in the documents. Only then the bank will consider borrower’s application for the top-up. Also, the bank only provides the additional loan facility if the borrower can mortgage the property in the bank’s name. Ideally, the maximum amount of top-up loan allowed by the banks is 75 percent of the mortgaged property; however, this percentage varied from bank to bank.
Advantages of the top-up loan
- One of the prime benefits of the top-up loan is that the loan amount could be used for any purpose, whether the borrower requires the loan for some personal purpose or for some business requirement.
- The interest rate for the top-up loan is almost similar to that of your existing loan. For example, State Bank if India offers home loan at the rate of 8.3 percent, whereas the rate of interest for the top-up loan, the bank charge is 8.4 percent if the top-up loan is availed for the same home loan.
- Another major benefit of availing the top-up loan is that there is no need for submitting all the documents again, due to the fact that the applicant must have already submitted the documents to the bank. Just a few updated documents might be required at the bank such as banks statement reflecting the repayment of existing loan.
- Top-up loans are easily approved by the bank as the verification process is already done by them. And the bank might use the previously submitted documents for reference to disburse the top-up loan amount.
- The tenure for the top-up loans differs from bank to bank but top-up loans are usually available for a long period such as for about 20 to 30 years. Some banks provide the top-up loans for only that much period which is outstanding for the existing loan. Whereas, some other banks might not consider the outstanding period and offer the loan for a period of about 20 to 30 years. Some banks might also provide the top-up loan only until the age of 70 years or until the age when the retirement starts.
- The top-up loan applicant can also avail tax benefit over the loan. But the loan amount should only be used for home extension or for educational purpose for either yourself or for your child.
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