A top-up loan is offered when you take an additional loan, over and above the home loan amount. You can opt for top up loan if you need extra funds and usually, there are no restrictions that accompany this loan. You can use it for home-related needs or to finance other expenses such as your child’s education, buying an asset such as a car, or even a vacation.
There are many benefits of top up loan financing:
It has a nominal interest rate: Repayment is affordable with interest rates slightly higher than home loan rates.
It has no spending restrictions: Use it for home-related needs or to finance other expenses such as your child’s education.
It has a long tenor: A top-up loan enjoys the same long tenor as your home loan.
It gives you funds quickly: The loan has simple eligibility criteria and has a quick disbursal mechanism.
It doesn’t require a separate application: You don’t have to apply for a separate loan from scratch. If you are availing it while doing a home loan balance transfer, you may have to submit the required documents for home loan financing.
It offers tax benefits: The interest that you pay towards the top-up loan is exempt from taxation under Section 24 of the Income Tax Act. To claim this benefit, you must be able to prove that you have used the top-up loan to acquire, construct, expand, repair, or renovate a residential property. You can also make use of this exemption if you use the loan amount for your child’s education.