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How Can You Benefit from a Top-up Loan?

  • Highlights

  • A top-up loan is given in addition to an existing home loan

  • It can be availed for 10-20 years and for multiple purposes

  • Collateral market value and credit history determine loan amount

  • Tax benefits on top-up loans are subject to clauses

A top-up loan, as the name suggests, is availed by the borrower over and above the already existing loan. Usually, the tenor of such a loan is 10 years. Most lenders offer this type of loan to borrowers who have already availed a home loan and have been repaying the amount diligently for a considerable period of time. Banks tend to exercise this caution to insulate themselves from any probable default on the part of the borrower. Read on to know the various aspects of a top-up loan and its benefits.

Is there any eligibility criteria?

Yes, there is. Lenders will allow such a loan only if you have had already taken a home loan earlier and been steadily paying back the amount towards the loan, at least over one year or as mentioned in the document. Your repayment track record is one of the most crucial determinants of you being considered for a top-up loan.

What are its features?

- A top-up loan will be given only if you have an existing home loan facility from the same bank/financial institution
- Generally, such a loan can be availed for anything between 10-20 years (this depends on the tenor of the existing loan)
- Your outstanding home loan will determine the value of a top-up loan. Additionally, the market price of the collateral that you pledge with the lender will be factored in while deciding the amount. While the percentage varies, a top-up loan amount on most occasions is Rs.10 lakh.
- Your credit history and repayment track record will also impact the top-up loan amount

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How will a top-up loan further your interests?

- It serves multiple purposes
The best part of a top-up loan is that it can serve a range of purposes, irrespective of the purpose of the loan. Be it paying for the annual family vacation or revamping your living room, a top-up loan is your ‘go-to’ facility.

- It is hassle-free
This kind of a loan will only be extended if you are an existing home loan borrower at the same bank. And therefore, there is no need for you to go through the rigorous documentation process as most of the papers are already lying with the lender. You might have to submit a bank statement that reflects all your repayment records. Just make sure it’s a clean one.

- A longer tenor
The tenor of such a loan can range from 10-20 years, which is longer vis-à-vis a personal loan that usually attaches a 1-2 years tenor. Sometimes, a lender will extend the top-up loan for the number of outstanding years on the existing home loan.

- Offers tax benefits
Though the good part is that a top-up loan does qualify for tax deductions, you will be considered eligible for the rebate if you put the loan to use in renovating your house, carving a necessary extension such as a parking space or investing it in your child’s education.

You can also check out your pre-approved offer on home loans, personal loans and business loans, from Bajaj Finserv that makes it easy to avail finance.

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